Air Force fails new nuclear reviews. By Bill Gertz
Washington Times, Feb 05, 2009
Air Force nuclear units have failed two inspections in the past three months, providing fresh evidence that the military service that jarred the world in 2007 by mistakenly transporting live nuclear weapons across the United States continues to suffer lapses in its management of intercontinental ballistic missiles.
Jennifer Thibault, a spokeswoman for the Air Force Space Command, said the failed "surety" inspections at Wyoming and Montana bases in November and December involved "administrative and paperwork issues." In all, three Air Force nuclear-missile units and two strategic-bomber units failed such inspections in 2008.
Despite the problems, the Air Force said it is making progress addressing issues with the security and handling of nuclear-tipped missiles that came to light after two embarrassing episodes in 2006 and 2007 prompted a widespread review and management changes.
"While we missed the mark in certain areas during the last three inspections of our ICBM wings, overall, we've seen that our airmen are highly capable of operating, maintaining and securing our nuclear forces," Miss Thibault told The Washington Times.
James Schlesinger, the former defense secretary who headed a recent task force on nuclear-weapons management, said Tuesday the continuing problems affect U.S. credibility worldwide - both in deterring attacks and assuring allies of protection - but he said he thinks the Air Force is committed to fixing the problems.
"Whatever the size of the nuclear force is, it has to be run with zero defects," Mr. Schlesinger said in an interview. "We've got to get back to that if we want to have any credibility in the international scene."
The most recent surety-inspection failure took place at the 90th Missile Wing at F.E. Warren Air Force Base in Wyoming from Dec. 2 to Dec. 17. The base is in charge of 150 Minuteman III missiles that are on alert 24 hours a day.
Air Force officials said the 90th was given failing grades by inspectors from the Space Command and the Defense Technology Security Administration for not properly documenting tests on missiles, which require strict monitoring.
The Wyoming base was at the center of one of the two prior nuclear mishaps that cast embarrassment on the Air Force. Nuclear-missile units at F.E. Warren mistakenly transported four Minuteman III forward sections containing sensitive components to Taiwan on two occasions, in October and November 2006. The components were recovered, but the mistake exposed larger security shortfalls.
A subsequent security breakdown allowed live nuclear weapons to be flown improperly from Minot Air Force Base in North Dakota to Barksdale Air Force Base in Louisiana in August 2007.
The incidents prompted Defense Secretary Robert M. Gates to form an eight-member Task Force on Nuclear Weapons Management that produced two reports critical of the Air Force's handling of nuclear missiles. On-site inspections were made stricter and have divulged additional problems, officials confirm.
The two other nuclear-surety-inspection failures took place last year at the 341st Missile Wing at Malstrom Air Force Base, Montana, from Oct. 26 to Nov. 10, and at the 91st Missile Wing at Minot Air Force Base, N.D., from Jan. 22 to Jan. 30, 2008. Both wings also handle 150 nuclear-tipped Minuteman IIIs deployed in underground silos.
Miss Thibault declined to provide details of the inspection failures because of the sensitivity of the information.
Surety inspections are held every 18 months and measure whether troops are prepared to fire missiles during a two-week testing period.
"Nuclear Surety Inspections (NSI) are extremely detailed and demand the absolute highest standards of compliance and accountability [to pass]," Miss Thibault said.
The Air Force defines nuclear-surety inspections as reviews of all nuclear-weapons-related material, people and procedures that "contribute to the security, safety, and reliability of nuclear weapons and to the assurance that there will be no nuclear-weapon accidents, incidents, unauthorized weapon detonations, or degradation in performance at the target."
Last year, the tests were made more rigorous, Miss Thibault said, following the critical report by the task force on nuclear weapons.
"These inspections are tools that our commanders use to determine the readiness of their units to perform the mission to the standard we demand - perfection," she said. "We're seeing progress in ICBM nuclear surety."
As for the test failures, "unsatisfactory inspection results, in the sense of identifying discrepancies, are part of the fix and should not be interpreted as suggesting that the ultimate security or safety of the American people or our allies has been put at risk," Miss Thibault said.
The Defense Department task force report issued in October warned that the Air Force was not doing its job of securing and maintaining nuclear-missile forces. The report identified a "serious erosion of senior-level attention, focus, expertise, mission readiness, resources, and discipline in the nuclear weapons mission."
The Air Force responded by initiating 100 steps to improve nuclear-weapons problems.
Data from the report show that the Air Force failed on five of its 22 surety inspections in 2008. It was the fourth time since 1992 that at least five failing grades were issued, the report stated.
According to the report and the Air Force, the five inspections failures during 2008 included the three at the missile wings and two at strategic nuclear bomber wings.
By contrast, in 2006 and 2007, there were a total of 18 surety inspections, and all received passing grades.
"Over the past 10 years, inspection pass rates point to anomalies that indicate a systemic problem in the inspection regime," the report said. "Something is clearly wrong."
A second task force report, made public Jan. 9, stated that rigorous nuclear surety inspections are "critical to maintaining a credible U.S. deterrent."
"However, the task force believes a significant shortfall exists in the DoD nuclear surety inspection process," the report said.
Mr. Schlesinger, who headed the task force, stated in the October report that the Air Force in recent years focused too much on conflicts in the Middle East and Afghanistan. "Both inattention and conscious budget decisions have led to the atrophy of the Air Force´s nuclear mission," he stated. "But the balance must be restored. Though reduced in scope, the nuclear mission remains essential."
The U.S. nuclear arsenal is still needed despite the demise of the Cold War for deterring nuclear threats to the United States and its allies, he said. The weapons must be maintained as a credible deterrent against nuclear powers such as China and Russia that are in the process of building up their nuclear forces, Mr. Schlesinger said.
The January task force report stated that one of the problems for the Air Force's nuclear weapons mission is that troops do not clearly understand the deterrence mission of the expensive and extremely powerful strategic weapons.
Unlike the Air Force, which has numerous problems with its nuclear mission, the Navy has sustained its commitment to nuclear forces but still is "fraying at the edges," the report said.
The task force "did not find in the Navy the kind of deterioration in morale that characterized Air Force nuclear units," the report said.
"The attitude in the Air Force was: 'We know that the president and secretary of defense don´t give a damn about what we do,' " the report stated.
By contrast, a Navy ballistic missile submarine crew told task force investigators that while senior Navy leaders are disinterested in the strategic nuclear deterrence forces, the ballistic missile submariners remain highly motivated.
"The attitude in the Navy was: 'We know that the president and secretary of defense don´t care - but we do,' " the report stated.
However, the final report also contained the conclusion that the problem of "the lack of interest in and attention to the nuclear mission and nuclear deterrence ... go well beyond the Air Force."
"This lack of interest and attention have been widespread throughout DoD and contributed to the decline of attention in the Air Force," the final report stated.
The report called for creating the position of assistant secretary of defense for nuclear deterrence, which would elevate nuclear issues that have been separated and downgraded as the result of a Pentagon reorganization during the Bush administration.
Thursday, February 5, 2009
Extremism and Social Learning
Extremism and Social Learning. By Edward L. Glaeser & Cass R. Sunstein
The Journal of Legal Analysis, Vol 1, No 1 (2009)
Abstract
When members of deliberating groups speak with one another, their predeliberation tendencies often become exacerbated as their views become more extreme. The resulting phenomenon—group polarization—has been observed in many settings, and it bears on the actions of juries, administrative tribunals, corporate boards, and other institutions. Polarization can result from rational Bayesian updating by group members, but in many contexts, this rational interpretation of polarization seems implausible. We argue that people are better seen as Credulous Bayesians, who insufficiently adjust for idiosyncratic features of particular environments and put excessive weight on the statements of others in situations of (1) common sources of information; (2) highly unrepresentative group membership; (3) statements that are made to obtain approval; and (4) statements that are designed to manipulate. Credulous Bayesianism can produce extremism and significant blunders—the folly of crowds. We discuss the implications of Credulous Bayesianism for law and politics, including media policy and cognitive diversity on administrative agencies and courts.
Introduction (excerpts):
Many people have celebrated the potential value of deliberation, including its uses in democracy (Habermas 1998), and it is tempting to think that group decision-making will both produce wiser decisions and average out individual extremism. In many settings and countries, however, researchers have found that group deliberation leads people to take more extreme positions (Brown 1986). The increased extremism, often called group polarization, is usually accompanied by greater confidence and significantly decreased internal diversity, even when individual opinions are given anonymously (Schkade, Sunstein & Kahneman 2000; Brown 1986, 207). These facts, which are summarized in Section 2 of this article, appear to cast doubt on the wisdom, and certainly the moderation, of crowds. If deliberation leads liberals to become more liberal, and conservatives to become more conservative, the effects of deliberation are unlikely to be desirable in both cases. Deliberation might account for the folly, not the wisdom, of crowds.
Group polarization has evident implications for many issues in law and politics. It suggests, for example, that like-minded jurors, judges, and administrative officials will move to extremes. If group members on a corporate board or in a political campaign are inclined to engage in risk-taking behavior, group deliberation will produce increased enthusiasm for taking risks. But the mechanisms behind group polarization remain inadequately understood, and it is difficult to make predictions or to offer prescriptions without identifying those mechanisms.
In Section 3 of this article, we show that group polarization is predicted by a highly rational process of Bayesian inference. If individuals have independent information, which is shared in the deliberative process, then Bayesian learning predicts that ex post opinions will be both more homogeneous within the group and more extreme than individual opinions. Bayesian inference suggests that individuals with access only to their own private information will recognize their ignorance and hew towards the center. The information of the crowd provides new data, which should lead people to be more confident and more extreme in their views. Because group members are listening to one another, it is no puzzle that their post-deliberation opinions are more extreme than their pre-deliberation opinions. The phenomenon of group polarization, on its own, does not imply that crowds are anything but wise; if individual deliberators tend to believe that the earth is round rather than flat, nothing is amiss if deliberation leads them to be firmer and more confident in that belief.
The Journal of Legal Analysis, Vol 1, No 1 (2009)
Abstract
When members of deliberating groups speak with one another, their predeliberation tendencies often become exacerbated as their views become more extreme. The resulting phenomenon—group polarization—has been observed in many settings, and it bears on the actions of juries, administrative tribunals, corporate boards, and other institutions. Polarization can result from rational Bayesian updating by group members, but in many contexts, this rational interpretation of polarization seems implausible. We argue that people are better seen as Credulous Bayesians, who insufficiently adjust for idiosyncratic features of particular environments and put excessive weight on the statements of others in situations of (1) common sources of information; (2) highly unrepresentative group membership; (3) statements that are made to obtain approval; and (4) statements that are designed to manipulate. Credulous Bayesianism can produce extremism and significant blunders—the folly of crowds. We discuss the implications of Credulous Bayesianism for law and politics, including media policy and cognitive diversity on administrative agencies and courts.
Introduction (excerpts):
Many people have celebrated the potential value of deliberation, including its uses in democracy (Habermas 1998), and it is tempting to think that group decision-making will both produce wiser decisions and average out individual extremism. In many settings and countries, however, researchers have found that group deliberation leads people to take more extreme positions (Brown 1986). The increased extremism, often called group polarization, is usually accompanied by greater confidence and significantly decreased internal diversity, even when individual opinions are given anonymously (Schkade, Sunstein & Kahneman 2000; Brown 1986, 207). These facts, which are summarized in Section 2 of this article, appear to cast doubt on the wisdom, and certainly the moderation, of crowds. If deliberation leads liberals to become more liberal, and conservatives to become more conservative, the effects of deliberation are unlikely to be desirable in both cases. Deliberation might account for the folly, not the wisdom, of crowds.
Group polarization has evident implications for many issues in law and politics. It suggests, for example, that like-minded jurors, judges, and administrative officials will move to extremes. If group members on a corporate board or in a political campaign are inclined to engage in risk-taking behavior, group deliberation will produce increased enthusiasm for taking risks. But the mechanisms behind group polarization remain inadequately understood, and it is difficult to make predictions or to offer prescriptions without identifying those mechanisms.
In Section 3 of this article, we show that group polarization is predicted by a highly rational process of Bayesian inference. If individuals have independent information, which is shared in the deliberative process, then Bayesian learning predicts that ex post opinions will be both more homogeneous within the group and more extreme than individual opinions. Bayesian inference suggests that individuals with access only to their own private information will recognize their ignorance and hew towards the center. The information of the crowd provides new data, which should lead people to be more confident and more extreme in their views. Because group members are listening to one another, it is no puzzle that their post-deliberation opinions are more extreme than their pre-deliberation opinions. The phenomenon of group polarization, on its own, does not imply that crowds are anything but wise; if individual deliberators tend to believe that the earth is round rather than flat, nothing is amiss if deliberation leads them to be firmer and more confident in that belief.
WaPo: The Senate Balks
The Senate Balks. Washington Post Editorial
Why President Obama should heed calls for a more focused stimulus package
WaPo: Thursday, February 5, 2009; page A16
Today in The Post, President Obama challenges critics of the $900 billion stimulus plan that was taking shape on Capitol Hill yesterday, accusing them of peddling "the same failed theories that helped lead us into this crisis" and warning that, without immediate action, "Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." A thinly veiled reference to Senate Republicans, this is a departure from his previous emphasis on bipartisanship. Still, as a matter of policy, Mr. Obama is justified in signaling that the plan should not be tilted in favor of tax cuts -- and that the GOP should not waste valuable time trying to achieve this.
However, ideology is not the only reason that senators -- from both parties -- are balking at the president's plan. As it emerged from the House, it suffered from a confusion of objectives. Mr. Obama praised the package yesterday as "not merely a prescription for short-term spending" but a "strategy for long-term economic growth in areas like renewable energy and health care and education." This is precisely the problem. As credible experts, including some Democrats, have pointed out, much of this "long-term" spending either won't stimulate the economy now, is of questionable merit, or both. Even potentially meritorious items, such as $2.1 billion for Head Start, or billions more to computerize medical records, do not belong in legislation whose reason for being is to give U.S. economic growth a "jolt," as Mr. Obama himself has put it. All other policy priorities should pass through the normal budget process, which involves hearings, debate and -- crucially -- competition with other programs.
Sen. Susan Collins of Maine is one of the moderate Republicans whose support the president must win if he is to garner the 60 Senate votes needed to pass a stimulus package. She and Democrat Ben Nelson of Nebraska are working on a plan that would carry a lower nominal price tag than the current bill -- perhaps $200 billion lower -- but which would focus on aid to states, "shovel-ready" infrastructure projects, food stamp increases and other items calculated to boost business and consumer spending quickly. On the revenue side, she would keep Mr. Obama's priorities, including a $500-per-worker tax rebate.
To his credit, Mr. Obama continues to seek bipartisan input, and he met individually with Ms. Collins for a half hour yesterday afternoon. We hope he gives her ideas serious consideration.
Why President Obama should heed calls for a more focused stimulus package
WaPo: Thursday, February 5, 2009; page A16
Today in The Post, President Obama challenges critics of the $900 billion stimulus plan that was taking shape on Capitol Hill yesterday, accusing them of peddling "the same failed theories that helped lead us into this crisis" and warning that, without immediate action, "Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." A thinly veiled reference to Senate Republicans, this is a departure from his previous emphasis on bipartisanship. Still, as a matter of policy, Mr. Obama is justified in signaling that the plan should not be tilted in favor of tax cuts -- and that the GOP should not waste valuable time trying to achieve this.
However, ideology is not the only reason that senators -- from both parties -- are balking at the president's plan. As it emerged from the House, it suffered from a confusion of objectives. Mr. Obama praised the package yesterday as "not merely a prescription for short-term spending" but a "strategy for long-term economic growth in areas like renewable energy and health care and education." This is precisely the problem. As credible experts, including some Democrats, have pointed out, much of this "long-term" spending either won't stimulate the economy now, is of questionable merit, or both. Even potentially meritorious items, such as $2.1 billion for Head Start, or billions more to computerize medical records, do not belong in legislation whose reason for being is to give U.S. economic growth a "jolt," as Mr. Obama himself has put it. All other policy priorities should pass through the normal budget process, which involves hearings, debate and -- crucially -- competition with other programs.
Sen. Susan Collins of Maine is one of the moderate Republicans whose support the president must win if he is to garner the 60 Senate votes needed to pass a stimulus package. She and Democrat Ben Nelson of Nebraska are working on a plan that would carry a lower nominal price tag than the current bill -- perhaps $200 billion lower -- but which would focus on aid to states, "shovel-ready" infrastructure projects, food stamp increases and other items calculated to boost business and consumer spending quickly. On the revenue side, she would keep Mr. Obama's priorities, including a $500-per-worker tax rebate.
To his credit, Mr. Obama continues to seek bipartisan input, and he met individually with Ms. Collins for a half hour yesterday afternoon. We hope he gives her ideas serious consideration.
WaPo: Zimbabwe's False Hope
Zimbabwe's False Hope. Washington Post Editorial
South Africa demands that the West aid a 'unity' government under Robert Mugabe. How to answer?
WaPo, Thursday, February 5, 2009; Page A16
SOUTH AFRICA has won a round in its relentless campaign to preserve Robert Mugabe's hold over a dying Zimbabwe. With the help of its allies in the Southern Africa Development Community, South Africa succeeded last week in coercing opposition leader Morgan Tsvangirai -- the winner of last year's presidential election -- into accepting a subordinate role in a "unity" government led by the 84-year-old strongman. The deal, which Mr. Tsvangirai bravely resisted for months, will leave Mr. Mugabe in charge of the country's last functioning institutions -- army and police forces that have been waging a campaign of murder, rape and torture against the opposition and human rights activists.
Mr. Tsvangirai relented because he believed that the frightful humanitarian emergency in Zimbabwe left him with little choice. The United Nations estimates that 7 million of the 9 million people remaining in the country need food aid this month. A cholera epidemic has so far infected more than 62,000 and killed 3,100. Schools, hospitals and most businesses have closed, the national currency has been discarded and unemployment is over 90 percent.
The opposition will be placed in charge of the finance, health and education ministries, which it hopes will allow it to solicit and distribute aid to prevent mass death from starvation and disease. As South Africa and its client more cynically calculate, Mr. Tsvangirai's appointment will compel the United States, Britain and other Western governments to lift sanctions and renew economic support, thus preventing what would otherwise be the inevitable collapse of Mr. Mugabe's regime.
The misery of Zimbabwe is indeed compelling -- but the Obama administration and other Western governments should reject South Africa's demands. It long ago became clear that Zimbabwe cannot recover as long as Mr. Mugabe remains in power. South Africa and other neighbors who insist on supporting the criminal regime are free to supply aid. But Western governments must maintain their sanctions -- especially those aimed at individual members of the Mugabe regime and the companies they control.
A State Department statement this week said the administration would consider new assistance and the lifting of sanctions "when we have seen evidence of true power sharing as well as inclusive and effective governance." What should that include? Mr. Tsvangirai himself is demanding the freeing of more than 30 opposition activists from prison. Legislation must be passed giving the opposition a measure of control over security forces, and replacing the central bank president -- a Mugabe crony -- with a technocrat. Restrictions on the press must be lifted and foreign journalists admitted. Perhaps most important, the government must agree on a plan for a new presidential election, with guarantees for fairness and full international monitoring.
If these steps were taken, Western aid to Zimbabwe might serve some purpose. But they won't be. "Zimbabwe is mine" is Mr. Mugabe's only principle. The first step in any rescue must be prying the country from his grip.
South Africa demands that the West aid a 'unity' government under Robert Mugabe. How to answer?
WaPo, Thursday, February 5, 2009; Page A16
SOUTH AFRICA has won a round in its relentless campaign to preserve Robert Mugabe's hold over a dying Zimbabwe. With the help of its allies in the Southern Africa Development Community, South Africa succeeded last week in coercing opposition leader Morgan Tsvangirai -- the winner of last year's presidential election -- into accepting a subordinate role in a "unity" government led by the 84-year-old strongman. The deal, which Mr. Tsvangirai bravely resisted for months, will leave Mr. Mugabe in charge of the country's last functioning institutions -- army and police forces that have been waging a campaign of murder, rape and torture against the opposition and human rights activists.
Mr. Tsvangirai relented because he believed that the frightful humanitarian emergency in Zimbabwe left him with little choice. The United Nations estimates that 7 million of the 9 million people remaining in the country need food aid this month. A cholera epidemic has so far infected more than 62,000 and killed 3,100. Schools, hospitals and most businesses have closed, the national currency has been discarded and unemployment is over 90 percent.
The opposition will be placed in charge of the finance, health and education ministries, which it hopes will allow it to solicit and distribute aid to prevent mass death from starvation and disease. As South Africa and its client more cynically calculate, Mr. Tsvangirai's appointment will compel the United States, Britain and other Western governments to lift sanctions and renew economic support, thus preventing what would otherwise be the inevitable collapse of Mr. Mugabe's regime.
The misery of Zimbabwe is indeed compelling -- but the Obama administration and other Western governments should reject South Africa's demands. It long ago became clear that Zimbabwe cannot recover as long as Mr. Mugabe remains in power. South Africa and other neighbors who insist on supporting the criminal regime are free to supply aid. But Western governments must maintain their sanctions -- especially those aimed at individual members of the Mugabe regime and the companies they control.
A State Department statement this week said the administration would consider new assistance and the lifting of sanctions "when we have seen evidence of true power sharing as well as inclusive and effective governance." What should that include? Mr. Tsvangirai himself is demanding the freeing of more than 30 opposition activists from prison. Legislation must be passed giving the opposition a measure of control over security forces, and replacing the central bank president -- a Mugabe crony -- with a technocrat. Restrictions on the press must be lifted and foreign journalists admitted. Perhaps most important, the government must agree on a plan for a new presidential election, with guarantees for fairness and full international monitoring.
If these steps were taken, Western aid to Zimbabwe might serve some purpose. But they won't be. "Zimbabwe is mine" is Mr. Mugabe's only principle. The first step in any rescue must be prying the country from his grip.
Criticism of Windpower’s "Homes Served" Claims
Beware Windpower’s "Homes Served" Claims, by Glenn Schleede
Master Resource, February 4, 2009
People who use the phrase “homes served” to describe the potential output from one or more wind turbines either do not understand the facts about wind turbines, believe false claims put forth by the wind industry, or are trying to mislead their reader or listener.
False statements about “homes served” by wind developers and their lobbyists are bad enough, but it is discouraging to hear politicians, reporters, and others adopt and regurgitate them.
The concept of “homes served”The concept of “homes served” has long been used in the electric industry as a way of giving some idea of the amount of electricity that would be produced by a proposed generating plant without using such terms as megawatt- or kilowatt-hours, which mean little to most people. The concept is always misleading since residential users of electricity (i.e., “homes served”) account for only 37% of all U.S. electricity use. [i]
Claims about “homes served” by a proposed “wind farm” or other generating unit are usually based on a three-step calculation:
Start with an assumption (i.e., a guess) about the amount of electricity that would be produced annually by a “wind farm” or other generating unit, in kilowatt-hours (kWh) or megawatt-hours (MWh).[ii]
Employ an estimate (in kWh) of the amount of electricity used annually by an average residential customer in the area or state where their “wind farm” is located. [iii]
Divide the assumed annual production of electricity by the estimated annual average residential electricity use.
“Homes Served” can be useful when talking about reliable generating unitsAlthough misleading, the concept of “homes served” has some validity when used to describe the output from a reliable, “dispatchable” electric generating unit, that is, one that can be called upon to produce electricity whenever it is needed. Such generating units are the ones that are counted on by the electric industry to provide a reliable supply of electricity for customers every day, at all hours of the day, year round.
“Homes served” is NOT a valid concept when referring to wind turbines and “wind farms”Using “homes served” when talking about wind turbines and “wind farms” is both false and misleading for several reasons.
1. NO homes are really served by wind.No homes are served by wind energy because wind turbines produce electricity only when wind speeds are in the right speed range (see below). Homes using electricity from wind must always have some reliable energy source immediately available to provide electricity when there is insufficient wind unless the residents are content to have electricity only when the wind is blowing in the right speed range – a condition that few in America are willing to tolerate.
2. Electricity from wind turbines is inherently intermittent, volatile, and unreliable.Wind turbines produce electricity only when the wind is blowing within the right speed range. Wind turbines typically start producing electricity at about 6 mph, reach rated capacity at about 32 mph, and cut out at about 56 mph. Unless a home owner has an expensive battery storage system, such volatile and unreliable output wouldn’t be suitable for lights, heating, computers, appliances, or many other purposes.
3. Electricity from “wind farms” is seldom available when most needed by home users.Again, the output of wind turbines is dependent on wind conditions. Depending on the specific area, winds tend to be strongest at night in cold months. However, electricity demand in most areas of the United States is heavily concentrated during daytime and early evening hours. Even worse, wind turbines cannot be counted on to produce at the time of peak electricity demand, which often occurs in late afternoon on hot weekdays in July and August. At the time of peak electricity demand, wind turbine output may be in the range of 0% to 5% of rated capacity.
4. The electricity produced by wind turbines is low in value compared to electricity from reliable generating units.That’s because it is inherently intermittent, volatile, unreliable, and not available when most needed—as described in points 2 and 3 above.
5. Not all the electricity produced by a wind turbine actually reaches customers or serves a useful purpose. Some electricity is lost as it is moved over transmission and distribution lines that carry the electricity from generating units to homes, offices, stores, factories and other users. The amount of electricity that is lost depends on the distance and the condition of lines and transformers. These “line losses” are a significant issue for wind energy because huge, obtrusive wind turbines (often 40+ stories tall) and “wind farms” are not welcome near metropolitan areas that account for most electricity demand. Therefore, they are often located at some distance from the areas where their electricity is needed and so require expensive transmission-line capacity, which they use inefficiently. (Ironically, the lucrative federal tax credits provided to “wind farm” owners are based on electricity produced, not the lesser amount that actually reaches customers and serves a useful purpose.)
6. Claims of “homes served” by wind energy are additionally misleading because of the high true cost of electricity from wind turbines.Claims that the cost of electricity from wind turbines is “competitive” with the cost of electricity from traditional sources are false. Such claims typically do not include the cost of (a) the huge federal and state tax breaks available to “wind farm” owners,[iv] or (b) the cost of providing the generating capacity and generation that must always be immediately available to “back up” intermittent, unreliable wind turbine output and keep electric grids reliable and in balance.
Claims of “homes served” should always be challenged Any use of the “homes served” assertion in connection with a “wind farm” should be challenged, whether the assertion is from a wind industry lobbyist, other wind energy advocate, political leader, other government official, or reporter. They should be required to explain each of their assumptions and calculations, and admit that industrial scale wind turbines are useless unless reliable generating units are immediately available to supply electricity when wind is not strong enough to produce significant electricity. Almost certainly, their assertions will be false.
What valid claim could wind industry officials make?As explained above, wind industry developers, promoters, and lobbyists – and politicians and reporters — should never use the false and misleading “homes served” metric. In theory, they could justify an assertion that the estimated amount of electricity produced by a “wind farm” – once discounted for line losses which are likely to be in the range of 5% to 10% — may be roughly equal to the amount of electricity used annually by X homes – after doing a calculation such as that outlined earlier. However, as indicated above, even this assertion would be misleading because it ignores the fact that the output from wind turbines is intermittent, volatile, unreliable, and unlikely to be available when electricity is most needed.
Other false and misleading claims about wind energyAs shown above, “homes served” is not the only or the most important false claim made about wind energy. Other false claims about wind energy include the following:
It is low or competitive in cost. In fact, its cost is high when all true costs are counted.
It is environmentally benign. In fact, it has significant adverse environmental, ecological, scenic, and property value impacts.
It avoids significant emissions that would otherwise be produced. In fact, it avoids few.
It provides big job and economic benefits. In fact, there are few such benefits.
It reduces U.S. dependence on imported oil. In fact, it does not.
It reduces the need for building reliable generating units in areas experiencing growth in peak electricity demand or needing to replace old generating units. The opposite is true.
Such claims as these have been made often during the past decade and more by the wind industry and other wind advocates. Only during the past 3–4 years have these claims begun to be demonstrated as false and misleading. The facts about wind energy are beginning to show up in the media but, unfortunately, have yet to be understood by most political leaders and regulators.
Full text w/references here http://masterresource.org/?p=677
Master Resource, February 4, 2009
People who use the phrase “homes served” to describe the potential output from one or more wind turbines either do not understand the facts about wind turbines, believe false claims put forth by the wind industry, or are trying to mislead their reader or listener.
False statements about “homes served” by wind developers and their lobbyists are bad enough, but it is discouraging to hear politicians, reporters, and others adopt and regurgitate them.
The concept of “homes served”The concept of “homes served” has long been used in the electric industry as a way of giving some idea of the amount of electricity that would be produced by a proposed generating plant without using such terms as megawatt- or kilowatt-hours, which mean little to most people. The concept is always misleading since residential users of electricity (i.e., “homes served”) account for only 37% of all U.S. electricity use. [i]
Claims about “homes served” by a proposed “wind farm” or other generating unit are usually based on a three-step calculation:
Start with an assumption (i.e., a guess) about the amount of electricity that would be produced annually by a “wind farm” or other generating unit, in kilowatt-hours (kWh) or megawatt-hours (MWh).[ii]
Employ an estimate (in kWh) of the amount of electricity used annually by an average residential customer in the area or state where their “wind farm” is located. [iii]
Divide the assumed annual production of electricity by the estimated annual average residential electricity use.
“Homes Served” can be useful when talking about reliable generating unitsAlthough misleading, the concept of “homes served” has some validity when used to describe the output from a reliable, “dispatchable” electric generating unit, that is, one that can be called upon to produce electricity whenever it is needed. Such generating units are the ones that are counted on by the electric industry to provide a reliable supply of electricity for customers every day, at all hours of the day, year round.
“Homes served” is NOT a valid concept when referring to wind turbines and “wind farms”Using “homes served” when talking about wind turbines and “wind farms” is both false and misleading for several reasons.
1. NO homes are really served by wind.No homes are served by wind energy because wind turbines produce electricity only when wind speeds are in the right speed range (see below). Homes using electricity from wind must always have some reliable energy source immediately available to provide electricity when there is insufficient wind unless the residents are content to have electricity only when the wind is blowing in the right speed range – a condition that few in America are willing to tolerate.
2. Electricity from wind turbines is inherently intermittent, volatile, and unreliable.Wind turbines produce electricity only when the wind is blowing within the right speed range. Wind turbines typically start producing electricity at about 6 mph, reach rated capacity at about 32 mph, and cut out at about 56 mph. Unless a home owner has an expensive battery storage system, such volatile and unreliable output wouldn’t be suitable for lights, heating, computers, appliances, or many other purposes.
3. Electricity from “wind farms” is seldom available when most needed by home users.Again, the output of wind turbines is dependent on wind conditions. Depending on the specific area, winds tend to be strongest at night in cold months. However, electricity demand in most areas of the United States is heavily concentrated during daytime and early evening hours. Even worse, wind turbines cannot be counted on to produce at the time of peak electricity demand, which often occurs in late afternoon on hot weekdays in July and August. At the time of peak electricity demand, wind turbine output may be in the range of 0% to 5% of rated capacity.
4. The electricity produced by wind turbines is low in value compared to electricity from reliable generating units.That’s because it is inherently intermittent, volatile, unreliable, and not available when most needed—as described in points 2 and 3 above.
5. Not all the electricity produced by a wind turbine actually reaches customers or serves a useful purpose. Some electricity is lost as it is moved over transmission and distribution lines that carry the electricity from generating units to homes, offices, stores, factories and other users. The amount of electricity that is lost depends on the distance and the condition of lines and transformers. These “line losses” are a significant issue for wind energy because huge, obtrusive wind turbines (often 40+ stories tall) and “wind farms” are not welcome near metropolitan areas that account for most electricity demand. Therefore, they are often located at some distance from the areas where their electricity is needed and so require expensive transmission-line capacity, which they use inefficiently. (Ironically, the lucrative federal tax credits provided to “wind farm” owners are based on electricity produced, not the lesser amount that actually reaches customers and serves a useful purpose.)
6. Claims of “homes served” by wind energy are additionally misleading because of the high true cost of electricity from wind turbines.Claims that the cost of electricity from wind turbines is “competitive” with the cost of electricity from traditional sources are false. Such claims typically do not include the cost of (a) the huge federal and state tax breaks available to “wind farm” owners,[iv] or (b) the cost of providing the generating capacity and generation that must always be immediately available to “back up” intermittent, unreliable wind turbine output and keep electric grids reliable and in balance.
Claims of “homes served” should always be challenged Any use of the “homes served” assertion in connection with a “wind farm” should be challenged, whether the assertion is from a wind industry lobbyist, other wind energy advocate, political leader, other government official, or reporter. They should be required to explain each of their assumptions and calculations, and admit that industrial scale wind turbines are useless unless reliable generating units are immediately available to supply electricity when wind is not strong enough to produce significant electricity. Almost certainly, their assertions will be false.
What valid claim could wind industry officials make?As explained above, wind industry developers, promoters, and lobbyists – and politicians and reporters — should never use the false and misleading “homes served” metric. In theory, they could justify an assertion that the estimated amount of electricity produced by a “wind farm” – once discounted for line losses which are likely to be in the range of 5% to 10% — may be roughly equal to the amount of electricity used annually by X homes – after doing a calculation such as that outlined earlier. However, as indicated above, even this assertion would be misleading because it ignores the fact that the output from wind turbines is intermittent, volatile, unreliable, and unlikely to be available when electricity is most needed.
Other false and misleading claims about wind energyAs shown above, “homes served” is not the only or the most important false claim made about wind energy. Other false claims about wind energy include the following:
It is low or competitive in cost. In fact, its cost is high when all true costs are counted.
It is environmentally benign. In fact, it has significant adverse environmental, ecological, scenic, and property value impacts.
It avoids significant emissions that would otherwise be produced. In fact, it avoids few.
It provides big job and economic benefits. In fact, there are few such benefits.
It reduces U.S. dependence on imported oil. In fact, it does not.
It reduces the need for building reliable generating units in areas experiencing growth in peak electricity demand or needing to replace old generating units. The opposite is true.
Such claims as these have been made often during the past decade and more by the wind industry and other wind advocates. Only during the past 3–4 years have these claims begun to be demonstrated as false and misleading. The facts about wind energy are beginning to show up in the media but, unfortunately, have yet to be understood by most political leaders and regulators.
Full text w/references here http://masterresource.org/?p=677
Wednesday, February 4, 2009
Relationships with the Drug Industry: Build Trust Based on Good Science
Relationships with the Drug Industry: Build Trust Based on Good Science. By Scott Gottlieb, M.D.
AEI, Wednesday, February 4, 2009
How do the current tensions in the relationship between the pharmaceutical industry, physicians, and patients affect individual health? Dr. Scott Gottlieb explores the possible causes for the breakdown in communication between these groups and charts a strategy to improve the productivity of their interactions and leverage these relationships in order to advance public health.
Medical treatments are becoming increasingly more individual, with respect to both disease and patient. They are also becoming more complex, and precise diagnoses and close monitoring are needed to optimise their use. In this environment, consumers and doctors need to work more closely with product developers. Yet increasing regulation of the drug industry is restricting its ability to disseminate the results of its clinical studies. This risks shrinking the opportunities patients have to improve their health. In the face of regulatory steps to restrain their scientific speech, drug makers need to take new steps in their relationship with doctors and patients and establish transparent guidelines for those interactions. They should also focus more squarely on matters of advancing science, monitoring for safety, and improving health education.
Science not marketing
A large part of the industry’s current problems stems from the way its relationship with academic physicians and medical institutions has evolved over the past few decades. Formerly, the industry depended on academic doctors to conduct basic and clinical research. Now more of that work is done in house.[1] As a consequence, the relationships forged with the academic medical community are often based on marketing related activities. This feeds the regrettable perception that drug makers ally themselves with medical thought leaders to advance marketing goals, not science, and that information they generate cannot be trusted.
Relationships should be predicated on genuine scientific work. This doesn’t mean that drug makers should stop engaging leading physicians to help companies generate and share information about new advances, but that they need to engage with doctors who had a role in discovering those advances rather than those with no or little link to the underlying science. The latter creates the unfortunate appearance that opinions are being rented; the former is unassailable, as a scientist is the most appropriate champion for his work.
Overcoming mistrust
As patients are taking an increasingly active role in treatment decisions drug companies need to take new steps to improve health literacy and patient education while they continue to invest in better ways to monitor the performance and safety of their products. Unfortunately, the existing mistrust means that policy makers continue to create restrictions that impede the ability of drug companies to speak to patients. This creates information asymmetry and denies patients the opportunity to receive truthful, non-misleading information about new products, thus hurting health outcomes.[2] [3] It also leads to a regulatory edifice that makes it harder for drug companies to monitor the performance of their drugs by talking directly with patients and makes it harder for them to provide targeted information to patients on proper use of prescription drugs. The bottom line remains that the drug firms remain one of the few actors in this marketplace with the financing and incentives to share and collect information. Under proper regulation, public health imperatives should compel us to make better use of these resources on behalf of patients.
Scott Gottlieb, M.D., is a resident fellow at AEI.
Notes
1. Bodenheimer T. Uneasy alliance--clinical investigators and the pharmaceutical industry. N Engl J Med 2000;342:1539-44.
2. Sentell TL, Halpin HA. Importance of adult literacy in understanding health disparities. J Gen Intern Med 2006;21:862-6.
3. Schillinger D, Grumbach K, Piette J, Wang F, Osmond D, Daher C, et al. Association of health literacy with diabetes outcomes. JAMA 2002;288:475-82.
Full text w/links in the references here
AEI, Wednesday, February 4, 2009
How do the current tensions in the relationship between the pharmaceutical industry, physicians, and patients affect individual health? Dr. Scott Gottlieb explores the possible causes for the breakdown in communication between these groups and charts a strategy to improve the productivity of their interactions and leverage these relationships in order to advance public health.
Medical treatments are becoming increasingly more individual, with respect to both disease and patient. They are also becoming more complex, and precise diagnoses and close monitoring are needed to optimise their use. In this environment, consumers and doctors need to work more closely with product developers. Yet increasing regulation of the drug industry is restricting its ability to disseminate the results of its clinical studies. This risks shrinking the opportunities patients have to improve their health. In the face of regulatory steps to restrain their scientific speech, drug makers need to take new steps in their relationship with doctors and patients and establish transparent guidelines for those interactions. They should also focus more squarely on matters of advancing science, monitoring for safety, and improving health education.
Science not marketing
A large part of the industry’s current problems stems from the way its relationship with academic physicians and medical institutions has evolved over the past few decades. Formerly, the industry depended on academic doctors to conduct basic and clinical research. Now more of that work is done in house.[1] As a consequence, the relationships forged with the academic medical community are often based on marketing related activities. This feeds the regrettable perception that drug makers ally themselves with medical thought leaders to advance marketing goals, not science, and that information they generate cannot be trusted.
Relationships should be predicated on genuine scientific work. This doesn’t mean that drug makers should stop engaging leading physicians to help companies generate and share information about new advances, but that they need to engage with doctors who had a role in discovering those advances rather than those with no or little link to the underlying science. The latter creates the unfortunate appearance that opinions are being rented; the former is unassailable, as a scientist is the most appropriate champion for his work.
Overcoming mistrust
As patients are taking an increasingly active role in treatment decisions drug companies need to take new steps to improve health literacy and patient education while they continue to invest in better ways to monitor the performance and safety of their products. Unfortunately, the existing mistrust means that policy makers continue to create restrictions that impede the ability of drug companies to speak to patients. This creates information asymmetry and denies patients the opportunity to receive truthful, non-misleading information about new products, thus hurting health outcomes.[2] [3] It also leads to a regulatory edifice that makes it harder for drug companies to monitor the performance of their drugs by talking directly with patients and makes it harder for them to provide targeted information to patients on proper use of prescription drugs. The bottom line remains that the drug firms remain one of the few actors in this marketplace with the financing and incentives to share and collect information. Under proper regulation, public health imperatives should compel us to make better use of these resources on behalf of patients.
Scott Gottlieb, M.D., is a resident fellow at AEI.
Notes
1. Bodenheimer T. Uneasy alliance--clinical investigators and the pharmaceutical industry. N Engl J Med 2000;342:1539-44.
2. Sentell TL, Halpin HA. Importance of adult literacy in understanding health disparities. J Gen Intern Med 2006;21:862-6.
3. Schillinger D, Grumbach K, Piette J, Wang F, Osmond D, Daher C, et al. Association of health literacy with diabetes outcomes. JAMA 2002;288:475-82.
Full text w/links in the references here
Cheney warns of new attacks
Cheney warns of new attacks. By John F Harris, Mike Allen and Jim VandeheiPolitico, Feb 04, 2009
http://www.politico.com/news/stories/0209/18390.html
Former Vice President Dick Cheney warned that there is a “high probability” that terrorists will attempt a catastrophic nuclear or biological attack in coming years, and said he fears the Obama administration’s policies will make it more likely the attempt will succeed.
In an interview Tuesday with Politico, Cheney unyieldingly defended the Bush administration’s support for the Guantanamo Bay prison and coercive interrogation of terrorism suspects.
And he asserted that President Obama will either backtrack on his stated intentions to end those policies or put the country at risk in ways more severe than most Americans—and, he charged, many members of Obama’s own team—understand.
“When we get people who are more concerned about reading the rights to an Al Qaeda terrorist than they are with protecting the United States against people who are absolutely committed to do anything they can to kill Americans, then I worry,” Cheney said.
Protecting the country’s security is “a tough, mean, dirty, nasty business,” he said. “These are evil people. And we’re not going to win this fight by turning the other cheek.”
Citing intelligence reports, Cheney said at least 61 of the inmates who were released from Guantanamo during the Bush administration—“that’s about 11 or 12 percent”—have “gone back into the business of being terrorists.”
The 200 or so inmates still there, he claimed, are “the hard core” whose “recidivism rate would be much higher.” He called Guantanamo a “first-class program,” and “a necessary facility” that is operated legally and with better food and treatment than the jails in inmates native countries.
But he said he worried that “instead of sitting down and carefully evaluating the policies,” Obama officials are unwisely following “campaign rhetoric” and preparing to release terrorism suspects or afford them legal protections granted to more conventional defendants in crime cases.
The choice, he alleged, reflects a naïve mindset among the new team in Washington: “The United States needs to be not so much loved as it needs to be respected. Sometimes, that requires us to take actions that generate controversy. I’m not at all sure that that’s what the Obama adminstration believes.”
The dire portrait Cheney painted of the country’s security situation was made even grimmer by his comments agreeing with analysts who this recession may be a once-in-a-century disaster.
“It’s unlike anything I’ve ever seen,” Cheney said. “The combination of the financial crisis that started last year, coupled now with, obviously, a major recession, I think we’re a long way from having solved these problems.”
The interview, less than two weeks after the Bush administration ceded power to Obama, found the man who is arguably the most controversial—and almost surely the most influential—vice president in U.S. history in a self-vindicating mood.
He expressed confidence that files will some day be publicly accessible offering specific evidence that waterboarding and other policies he promoted—over sharp internal dissent from colleagues and harsh public criticism—were directly responsible for averting new September 11-style attacks.
Not content to wait for a historical verdict, Cheney said he is set to plunge into his own memoirs, feeling liberated to describe behind-the-scenes roles over several decades in government now that the “statute of limitations has expired” on many of the most sensitive episodes.
His comments made unmistakable that Cheney—likely more than former President Bush, who has not yet given post-White House interviews—-is willing and even eager to spar with the new administration and its supporters over the issues he cares most about.
His standing in this public debate is beset by contradictions. Cheney for years has had intimate access to the sort of highly classified national security intelligence that Obama and his teams are only recently seeing.
But many of the top Democratic legal and national security players have long viewed Cheney as a man who became unhinged by his fears, responsible for major misjudgments in Iraq and Afghanistan, willing to bend or break legal precedents and constitutional principles to advance his aims. Polls show he is one of the most unpopular people in national life.
In the interview, Cheney revealed no doubts about his own course—and many about the new administration’s.
“If it hadn’t been for what we did—with respect to the terrorist surveillance program, or enhanced interrogation techniques for high-value detainees, the Patriot Act, and so forth—then we would have been attacked again,” he said. “Those policies we put in place, in my opinion, were absolutely crucial to getting us through the last seven-plus years without a major-casualty attack on the U.S.”
Cheney said “the ultimate threat to the country” is “a 9/11-type event where the terrorists are armed with something much more dangerous than an airline ticket and a box cutter – a nuclear weapon or a biological agent of some kind” that is deployed in the middle of an American city.
“That’s the one that would involve the deaths of perhaps hundreds of thousands of people, and the one you have to spend a hell of a lot of time guarding against,” he said.
“I think there’s a high probability of such an attempt. Whether or not they can pull it off depends whether or not we keep in place policies that have allowed us to defeat all further attempts, since 9/11, to launch mass-casualty attacks against the United States.”
If Cheney’s language was dramatic, the setting for the comments was almost bizarrely pedestrian. His office is in a non-descript suburban office building in McLean, in a suite that could just as easily house a dental clinic. The office is across the hall from a quick-copy store. The door is marked by nothing except a paper sign, held up by tape, saying the unit is occupied by the General Services Administration.
At several points, Cheney resisted singling out Obama personally for criticism, at one saying he wants to give him a break after just two weeks in office. He said he admires Obama’s choice to keep Defense Secretary Robert Gates on the job.
But if he treated Obama gingerly, Cheney was eager to engage in the broader philosophical debate he was with Democrats and even many in his own party about the right way to navigate a dangerous planet. He said he fears the people populating Obama’s ranks put too much faith in negotiation, persuasion, and good intentions.
“I think there are some who probably actually believe that if we just go talk nice to these folks, everything’s going to be okay,” he said.
He said his own experience tempers his belief in diplomacy.
“I think they’re optimistic. All new administrations are optimistic. We were,” he said.
“They may be able, in some cases, to make progress diplomatically that we weren’t,” Cheney said. “But, on the other hand, I think they’re likely to find—just as we did—that lots of times the diplomacy deosn’t work. Or diplomacy doesn’t work without there being an implied threat of something more serious if it fails.”
As examples of the dangerous world he sees—and one he predicted Obama and aides would find “sobering”—were Russia’s backsliding into authoritarianism and away from democracy, and the ongoing showdowns over the nuclear intentions of Iran and North Korea.
But it was the choice over Guantanamo that most dominated Cheney’s comments.
“If you release the hard-core al Qaeda terrorists that are held at Guantanamo, I think they go back into the business of trying to kill more Americans and mount further mass-casualty attacks,” he said. “If you turn ’em loose and they go kill more Americans, who’s responsible for that?”
Of one alternative—moving prisoners to the U.S. prisons—Cheney said he has heard from few members of Congress eager for Guantanamo transfers to their home-state prisons, and asked: “Is that really a good idea to take hardened al Qaeda terrorists who’ve already killed thousands of Americans and put ’em in San Quentin or some other prison facility where they can spread their venom even more widely than it already is?”
While Cheney’s words were dire, his own mood was relaxed, even loquacious. He was not on crutches—much less the wheelchair he rode to Obama’s inauguration—from an injury while moving a box of books into his new home.
Suddenly a man of leisure, Cheney has a Kindle, Amazon’s wireless reading device, and said he used it recently to read James M. McPherson’s new “Tried by War: Abraham Lincoln as Commander in Chief.” About a week ago, he had a phone conversation with former President George W. Bush, the first time the two had talked since they appeared together at a rally at Andrews Air Force Base just after Obama’s swearing-in.
“He’s fine,” Cheney said. “We had a pleasant chat on the phone. It was a private, personal conversation – not about policy. We’re both citizens – civilians.”
Other highlights of the 90-minute interview:
*What Cheney called “the trillion-dollar so-called stimulus bill”: “It looks to me like there’s a lot of stuff in there that has nothing to do with stimulus – it’s a sort of a wish list of a lot of my congressional Democratic friends,” he said.
*The potential consequences of $1 trillion in deficit stimulus spending: “It’s huge, obviously – potentially huge. You worry about what ultimately happens to inflation. You worry about what’s going to happen to the ability of the government to borrow money. … I’m nervous.”
*Whether the Bush administration should have done more about the economy: “We did worry about it, to some extent. … I don’t think anybody actually foresaw something of this size and dimension occurring. It’s also global. We only control part of the world economy – a very important part.”
*On the chance of progress in the Israeli-Palestinian peace process in the foreseeable future: “I think it’s unlikely.”
After leaving office, Cheney and his wife, Lynne, went first to his home in Wyoming, then returned to Washington to enjoy their grandchildren. He’s working on a book about his career, which has included stints as a House member, White House chief of staff and secretary of Defense.
His daughter, Liz Cheney, the former principal Deputy Assistant Secretary of State for Near Eastern Affair, supervised the interview and at one point was looking for a tape recorder.
“I’m not a very good press aide,” she joshed.
Cheney found one on his own. “See, you don’t need staff,” she said.
http://www.politico.com/news/stories/0209/18390.html
Former Vice President Dick Cheney warned that there is a “high probability” that terrorists will attempt a catastrophic nuclear or biological attack in coming years, and said he fears the Obama administration’s policies will make it more likely the attempt will succeed.
In an interview Tuesday with Politico, Cheney unyieldingly defended the Bush administration’s support for the Guantanamo Bay prison and coercive interrogation of terrorism suspects.
And he asserted that President Obama will either backtrack on his stated intentions to end those policies or put the country at risk in ways more severe than most Americans—and, he charged, many members of Obama’s own team—understand.
“When we get people who are more concerned about reading the rights to an Al Qaeda terrorist than they are with protecting the United States against people who are absolutely committed to do anything they can to kill Americans, then I worry,” Cheney said.
Protecting the country’s security is “a tough, mean, dirty, nasty business,” he said. “These are evil people. And we’re not going to win this fight by turning the other cheek.”
Citing intelligence reports, Cheney said at least 61 of the inmates who were released from Guantanamo during the Bush administration—“that’s about 11 or 12 percent”—have “gone back into the business of being terrorists.”
The 200 or so inmates still there, he claimed, are “the hard core” whose “recidivism rate would be much higher.” He called Guantanamo a “first-class program,” and “a necessary facility” that is operated legally and with better food and treatment than the jails in inmates native countries.
But he said he worried that “instead of sitting down and carefully evaluating the policies,” Obama officials are unwisely following “campaign rhetoric” and preparing to release terrorism suspects or afford them legal protections granted to more conventional defendants in crime cases.
The choice, he alleged, reflects a naïve mindset among the new team in Washington: “The United States needs to be not so much loved as it needs to be respected. Sometimes, that requires us to take actions that generate controversy. I’m not at all sure that that’s what the Obama adminstration believes.”
The dire portrait Cheney painted of the country’s security situation was made even grimmer by his comments agreeing with analysts who this recession may be a once-in-a-century disaster.
“It’s unlike anything I’ve ever seen,” Cheney said. “The combination of the financial crisis that started last year, coupled now with, obviously, a major recession, I think we’re a long way from having solved these problems.”
The interview, less than two weeks after the Bush administration ceded power to Obama, found the man who is arguably the most controversial—and almost surely the most influential—vice president in U.S. history in a self-vindicating mood.
He expressed confidence that files will some day be publicly accessible offering specific evidence that waterboarding and other policies he promoted—over sharp internal dissent from colleagues and harsh public criticism—were directly responsible for averting new September 11-style attacks.
Not content to wait for a historical verdict, Cheney said he is set to plunge into his own memoirs, feeling liberated to describe behind-the-scenes roles over several decades in government now that the “statute of limitations has expired” on many of the most sensitive episodes.
His comments made unmistakable that Cheney—likely more than former President Bush, who has not yet given post-White House interviews—-is willing and even eager to spar with the new administration and its supporters over the issues he cares most about.
His standing in this public debate is beset by contradictions. Cheney for years has had intimate access to the sort of highly classified national security intelligence that Obama and his teams are only recently seeing.
But many of the top Democratic legal and national security players have long viewed Cheney as a man who became unhinged by his fears, responsible for major misjudgments in Iraq and Afghanistan, willing to bend or break legal precedents and constitutional principles to advance his aims. Polls show he is one of the most unpopular people in national life.
In the interview, Cheney revealed no doubts about his own course—and many about the new administration’s.
“If it hadn’t been for what we did—with respect to the terrorist surveillance program, or enhanced interrogation techniques for high-value detainees, the Patriot Act, and so forth—then we would have been attacked again,” he said. “Those policies we put in place, in my opinion, were absolutely crucial to getting us through the last seven-plus years without a major-casualty attack on the U.S.”
Cheney said “the ultimate threat to the country” is “a 9/11-type event where the terrorists are armed with something much more dangerous than an airline ticket and a box cutter – a nuclear weapon or a biological agent of some kind” that is deployed in the middle of an American city.
“That’s the one that would involve the deaths of perhaps hundreds of thousands of people, and the one you have to spend a hell of a lot of time guarding against,” he said.
“I think there’s a high probability of such an attempt. Whether or not they can pull it off depends whether or not we keep in place policies that have allowed us to defeat all further attempts, since 9/11, to launch mass-casualty attacks against the United States.”
If Cheney’s language was dramatic, the setting for the comments was almost bizarrely pedestrian. His office is in a non-descript suburban office building in McLean, in a suite that could just as easily house a dental clinic. The office is across the hall from a quick-copy store. The door is marked by nothing except a paper sign, held up by tape, saying the unit is occupied by the General Services Administration.
At several points, Cheney resisted singling out Obama personally for criticism, at one saying he wants to give him a break after just two weeks in office. He said he admires Obama’s choice to keep Defense Secretary Robert Gates on the job.
But if he treated Obama gingerly, Cheney was eager to engage in the broader philosophical debate he was with Democrats and even many in his own party about the right way to navigate a dangerous planet. He said he fears the people populating Obama’s ranks put too much faith in negotiation, persuasion, and good intentions.
“I think there are some who probably actually believe that if we just go talk nice to these folks, everything’s going to be okay,” he said.
He said his own experience tempers his belief in diplomacy.
“I think they’re optimistic. All new administrations are optimistic. We were,” he said.
“They may be able, in some cases, to make progress diplomatically that we weren’t,” Cheney said. “But, on the other hand, I think they’re likely to find—just as we did—that lots of times the diplomacy deosn’t work. Or diplomacy doesn’t work without there being an implied threat of something more serious if it fails.”
As examples of the dangerous world he sees—and one he predicted Obama and aides would find “sobering”—were Russia’s backsliding into authoritarianism and away from democracy, and the ongoing showdowns over the nuclear intentions of Iran and North Korea.
But it was the choice over Guantanamo that most dominated Cheney’s comments.
“If you release the hard-core al Qaeda terrorists that are held at Guantanamo, I think they go back into the business of trying to kill more Americans and mount further mass-casualty attacks,” he said. “If you turn ’em loose and they go kill more Americans, who’s responsible for that?”
Of one alternative—moving prisoners to the U.S. prisons—Cheney said he has heard from few members of Congress eager for Guantanamo transfers to their home-state prisons, and asked: “Is that really a good idea to take hardened al Qaeda terrorists who’ve already killed thousands of Americans and put ’em in San Quentin or some other prison facility where they can spread their venom even more widely than it already is?”
While Cheney’s words were dire, his own mood was relaxed, even loquacious. He was not on crutches—much less the wheelchair he rode to Obama’s inauguration—from an injury while moving a box of books into his new home.
Suddenly a man of leisure, Cheney has a Kindle, Amazon’s wireless reading device, and said he used it recently to read James M. McPherson’s new “Tried by War: Abraham Lincoln as Commander in Chief.” About a week ago, he had a phone conversation with former President George W. Bush, the first time the two had talked since they appeared together at a rally at Andrews Air Force Base just after Obama’s swearing-in.
“He’s fine,” Cheney said. “We had a pleasant chat on the phone. It was a private, personal conversation – not about policy. We’re both citizens – civilians.”
Other highlights of the 90-minute interview:
*What Cheney called “the trillion-dollar so-called stimulus bill”: “It looks to me like there’s a lot of stuff in there that has nothing to do with stimulus – it’s a sort of a wish list of a lot of my congressional Democratic friends,” he said.
*The potential consequences of $1 trillion in deficit stimulus spending: “It’s huge, obviously – potentially huge. You worry about what ultimately happens to inflation. You worry about what’s going to happen to the ability of the government to borrow money. … I’m nervous.”
*Whether the Bush administration should have done more about the economy: “We did worry about it, to some extent. … I don’t think anybody actually foresaw something of this size and dimension occurring. It’s also global. We only control part of the world economy – a very important part.”
*On the chance of progress in the Israeli-Palestinian peace process in the foreseeable future: “I think it’s unlikely.”
After leaving office, Cheney and his wife, Lynne, went first to his home in Wyoming, then returned to Washington to enjoy their grandchildren. He’s working on a book about his career, which has included stints as a House member, White House chief of staff and secretary of Defense.
His daughter, Liz Cheney, the former principal Deputy Assistant Secretary of State for Near Eastern Affair, supervised the interview and at one point was looking for a tape recorder.
“I’m not a very good press aide,” she joshed.
Cheney found one on his own. “See, you don’t need staff,” she said.
John Kyl: "President Bush's Lasting Legacy: Missile Defense"
President Bush's Lasting Legacy: Missile Defense. By John Kyl
The Bush-Cheney Alumni Association, Feb 03, 2009
When the history of the Bush administration's national security achievements is written, one of the most significant accomplishments will be the building of a national missile defense system.
The idea of a national ballistic missile defense system to supplement the nuclear deterrent was born 25 years ago by our 40th president, Ronald Reagan, who said, "I've become more and more deeply convinced that the human spirit must be capable of rising above dealing with other nations and human beings by threatening their existence."
But, something stood in President Reagan's way: the 1972 Anti-Ballistic Missile (ABM) Treaty. This treaty was a classic example of arms control promising much more than it was ever able to deliver.
The theory was that by ensuring mutual vulnerability to nuclear missile attack, the incentive to build increasing numbers of offensive forces would be removed. History proved that theory wrong. And, in fact, strategic nuclear forces expanded not just quantitatively, but also qualitatively.
The ABM treaty also stood in the way of developing defenses against rogue regimes that were - and are - developing ballistic missiles. Deterrence is simply inadequate in dealing with rogue dictators. To depend only on nuclear deterrence - that is, rational decision making - with the Iranian and North Korean regimes would be irresponsible. And so, President Bush officially withdrew the United States the ABM treaty in June 2002.
Four years later, in 2006, the wisdom of President Bush's action was demonstrated when North Korea tested its Tae Po Dong 2 missile and detonated a nuclear device. Had it been necessary, the Missile Defense Agency was able to provide the president a real missile defense capability to combat the threat posed to the American people by a rogue regime armed with ballistic missiles and weapons of mass destruction.
The United States missile defense system is now composed of 26 Ground-Based Interceptors in California and Alaska; 18 Aegis ballistic missile defense warships, complete with 65 interceptors on board; an advanced system of command and control; and surveillance and targeting radars. This is a significant capability, but it represents only the beginning of what's needed to protect the American people.
It is now President Obama's responsibility to ensure the safety of the American people against all threats, including the ballistic missile threat. The available evidence suggests this will not be easy. In recent years, Democrats in the House and Senate have made significant cuts to the missile defense budget, including restricting the development of defenses against future threats we know our adversaries are developing.
Our new president should also welcome Congress' recent decision to reverse an ill-conceived decision that it and President Clinton made in 1993 to abandon the study of space-based interceptors for missile defense. As a result of this reversal, the Department of Defense can now move forward on a study that could provide a roadmap for both a future defense of the United States from ballistic missile attack and a defense of our critical national security space systems. Opponents of this decision are already at work to stop the positive momentum created by Congress' decision to fund this study. They will not only attempt to cancel it, they will attempt to permanently shackle the defensive capability of the United States with a "space weapons ban" treaty, which could not work and would effectively amount to nothing more than feel good arms control.
President Bush left office having provided the American people, and his successor, a significant new defense capability. History will not be able to ignore this legacy. President Obama's opportunity to follow this good example has just begun. May history prove his judgment to be as good as his predecessor.
Sen. Kyl serves on the Senate Finance and Judiciary committees and as the Senate Minority Whip. Visit his website at www.kyl.senate.gov.
The Bush-Cheney Alumni Association, Feb 03, 2009
When the history of the Bush administration's national security achievements is written, one of the most significant accomplishments will be the building of a national missile defense system.
The idea of a national ballistic missile defense system to supplement the nuclear deterrent was born 25 years ago by our 40th president, Ronald Reagan, who said, "I've become more and more deeply convinced that the human spirit must be capable of rising above dealing with other nations and human beings by threatening their existence."
But, something stood in President Reagan's way: the 1972 Anti-Ballistic Missile (ABM) Treaty. This treaty was a classic example of arms control promising much more than it was ever able to deliver.
The theory was that by ensuring mutual vulnerability to nuclear missile attack, the incentive to build increasing numbers of offensive forces would be removed. History proved that theory wrong. And, in fact, strategic nuclear forces expanded not just quantitatively, but also qualitatively.
The ABM treaty also stood in the way of developing defenses against rogue regimes that were - and are - developing ballistic missiles. Deterrence is simply inadequate in dealing with rogue dictators. To depend only on nuclear deterrence - that is, rational decision making - with the Iranian and North Korean regimes would be irresponsible. And so, President Bush officially withdrew the United States the ABM treaty in June 2002.
Four years later, in 2006, the wisdom of President Bush's action was demonstrated when North Korea tested its Tae Po Dong 2 missile and detonated a nuclear device. Had it been necessary, the Missile Defense Agency was able to provide the president a real missile defense capability to combat the threat posed to the American people by a rogue regime armed with ballistic missiles and weapons of mass destruction.
The United States missile defense system is now composed of 26 Ground-Based Interceptors in California and Alaska; 18 Aegis ballistic missile defense warships, complete with 65 interceptors on board; an advanced system of command and control; and surveillance and targeting radars. This is a significant capability, but it represents only the beginning of what's needed to protect the American people.
It is now President Obama's responsibility to ensure the safety of the American people against all threats, including the ballistic missile threat. The available evidence suggests this will not be easy. In recent years, Democrats in the House and Senate have made significant cuts to the missile defense budget, including restricting the development of defenses against future threats we know our adversaries are developing.
Our new president should also welcome Congress' recent decision to reverse an ill-conceived decision that it and President Clinton made in 1993 to abandon the study of space-based interceptors for missile defense. As a result of this reversal, the Department of Defense can now move forward on a study that could provide a roadmap for both a future defense of the United States from ballistic missile attack and a defense of our critical national security space systems. Opponents of this decision are already at work to stop the positive momentum created by Congress' decision to fund this study. They will not only attempt to cancel it, they will attempt to permanently shackle the defensive capability of the United States with a "space weapons ban" treaty, which could not work and would effectively amount to nothing more than feel good arms control.
President Bush left office having provided the American people, and his successor, a significant new defense capability. History will not be able to ignore this legacy. President Obama's opportunity to follow this good example has just begun. May history prove his judgment to be as good as his predecessor.
Sen. Kyl serves on the Senate Finance and Judiciary committees and as the Senate Minority Whip. Visit his website at www.kyl.senate.gov.
The news of Daschle's withdrawal shocked his Democratic colleagues
Obama on Daschle: I take responsibility. By Josh Gerstein
Politico, Feb 03, 2009
Excerpts:
[...]
The news of Daschle's withdrawal shocked his Democratic colleagues, many of whom had vowed to fight for his nomination.
"It's a big loss for the country," said Sen. Kent Conrad (D-ND.).
Conrad called Daschle "one of the most honest men" he had ever known, but said it was a case where "the story never caught up with headlines."
"I think it"s a tragedy," said a visibly irate Conrad.
"I wish Tom Daschle had not decided to withdraw his nomination," Sen. John Kerry (D-Mass.) said in a statement. "While Tom’s decision is a reminder of his loyalty to President Obama and his determination not to be a distraction, this was no ordinary appointment and today is not a good day for the cause of health care reform."
Obama told NBC Tuesday afternoon that the twin withdrawals made him "angry and disappointed and it's something I have to take responsibility for. I appointed these folks."
The distraction Daschle referred to was the mounting furor over his tax problems - a controversy that threatened to become a permanent blot on Obama's promise to clean up Washington's ethical quagmire. The White House appeared to have the votes to confirm Daschle in the Senate- but seems to have made the judgment that there were larger forces at play, forces that could bring long-term harm to the young administration.
Baucus said Daschle's withdrawal was "surprising" and "unfortunate."
"I just learned of it 15, 20 minutes ago," Baucus said. "I was a little surprised. I thought he was going to get confirmed. He's a good man. I thought he'd be confirmed."
[...]
The issue for Obama was one of credibility. The new president ran and won as a reform candidate, promising a new brand of politics. The day after being sworn in, he immediately put in place what he touted as far-reaching ethical reforms. But Obama quickly granted exceptions to his purportedly hard-line ban on lobbyists serving in his administration and is now offering explanations as to why it is acceptable for two of his top cabinet officers to serve despite failing to pay taxes.
These issues threaten to divert Obama from his focus on rejuvenating the economy and are prompting questions from otherwise political allies on his commitment to changing the political culture of the capital. Obama is not just getting flak from predictable political opponents: the Daschle nomination was savaged Tuesday morning by the New York Times editorial page and has also been criticized by the Nation magazine, a touchstone of Democratic liberalism.
On MSNBC, Andrea Mitchell said she had just spoken with Daschle - who said that when he read the New York Times this morning, he realized he could never pass health care reform if he was such a distraction.
Killefer's decision to step down also seemed a result of the mounting drumbeat of criticism of the new Obama team. “Said a Senate source of Killefer: "She has nanny tax problems that may not have been insurmountable on their own, but given the Geithner and Daschle cumulative effect, she had to withdraw.”
Gibbs said Daschle and Killefer came to the realization that their mistakes would be seen as tarnishing Obama’s mandate for change. “I think they both recognize that you can’t set a standard of responsibility but set a different example in who serves,” he said.
Obama ignored a shouted question Monday morning from CNN’s Ed Henry after a White House ceremony announcing the selection of Sen. Judd Gregg as Commerce Secretary as to why so many administration appointees are having tax troubles.
John Bresnahan, Carol E. Lee, Jonathan Martin and Manu Raju contributed to this story.
Politico, Feb 03, 2009
Excerpts:
[...]
The news of Daschle's withdrawal shocked his Democratic colleagues, many of whom had vowed to fight for his nomination.
"It's a big loss for the country," said Sen. Kent Conrad (D-ND.).
Conrad called Daschle "one of the most honest men" he had ever known, but said it was a case where "the story never caught up with headlines."
"I think it"s a tragedy," said a visibly irate Conrad.
"I wish Tom Daschle had not decided to withdraw his nomination," Sen. John Kerry (D-Mass.) said in a statement. "While Tom’s decision is a reminder of his loyalty to President Obama and his determination not to be a distraction, this was no ordinary appointment and today is not a good day for the cause of health care reform."
Obama told NBC Tuesday afternoon that the twin withdrawals made him "angry and disappointed and it's something I have to take responsibility for. I appointed these folks."
The distraction Daschle referred to was the mounting furor over his tax problems - a controversy that threatened to become a permanent blot on Obama's promise to clean up Washington's ethical quagmire. The White House appeared to have the votes to confirm Daschle in the Senate- but seems to have made the judgment that there were larger forces at play, forces that could bring long-term harm to the young administration.
Baucus said Daschle's withdrawal was "surprising" and "unfortunate."
"I just learned of it 15, 20 minutes ago," Baucus said. "I was a little surprised. I thought he was going to get confirmed. He's a good man. I thought he'd be confirmed."
[...]
The issue for Obama was one of credibility. The new president ran and won as a reform candidate, promising a new brand of politics. The day after being sworn in, he immediately put in place what he touted as far-reaching ethical reforms. But Obama quickly granted exceptions to his purportedly hard-line ban on lobbyists serving in his administration and is now offering explanations as to why it is acceptable for two of his top cabinet officers to serve despite failing to pay taxes.
These issues threaten to divert Obama from his focus on rejuvenating the economy and are prompting questions from otherwise political allies on his commitment to changing the political culture of the capital. Obama is not just getting flak from predictable political opponents: the Daschle nomination was savaged Tuesday morning by the New York Times editorial page and has also been criticized by the Nation magazine, a touchstone of Democratic liberalism.
On MSNBC, Andrea Mitchell said she had just spoken with Daschle - who said that when he read the New York Times this morning, he realized he could never pass health care reform if he was such a distraction.
Killefer's decision to step down also seemed a result of the mounting drumbeat of criticism of the new Obama team. “Said a Senate source of Killefer: "She has nanny tax problems that may not have been insurmountable on their own, but given the Geithner and Daschle cumulative effect, she had to withdraw.”
Gibbs said Daschle and Killefer came to the realization that their mistakes would be seen as tarnishing Obama’s mandate for change. “I think they both recognize that you can’t set a standard of responsibility but set a different example in who serves,” he said.
Obama ignored a shouted question Monday morning from CNN’s Ed Henry after a White House ceremony announcing the selection of Sen. Judd Gregg as Commerce Secretary as to why so many administration appointees are having tax troubles.
John Bresnahan, Carol E. Lee, Jonathan Martin and Manu Raju contributed to this story.
Howard Dean for HHS or Health Czar
Howard Dean for HHS or Health Czar. By Cenk Uygur
HuffingtonPost, Feb 04, 2009
Remember Tom Daschle was selected for two different positions in the Obama administration. The Secretary of Health and Human Services and Health Czar. These can be and are meant to be two distinct jobs (otherwise, why bother having a health czar).
At this point, if Howard Dean is not selected for at least one of these positions, it is a clear snub. But not just to Dean, but to all like-minded progressives. There's no way that Rahm Emanuel's animosity toward Dean can be explained away if they pass over him again, especially given his tremendous success at the DNC. That success is not a claim he holds over the Democratic Party, it is a testament to his ability to get things done.
We still want to get things done, right? We don't just want to bargain with the Republicans all day long and walk away without real change, do we? Are we playing a political game of who can appear to be more bi-partisan or are we really going to bring the change that was promised?
You know who promised change and then really delivered? Howard Dean. No one believed that he could change the mindset at the DNC and have the kind of success he did with the 50 state strategy. But he got it done. It would be unconscionable to ignore that. If they don't tap Dean for at least one of these positions, there is something seriously wrong with the way this administration is going about its business. This would bring things to the point where I would begin to question if they actually want to affect change or not.
By the way, why is there always room for another Republican in this team of rivals cabinet, but never room for one strong progressive voice we all trust like Howard Dean?
HuffingtonPost, Feb 04, 2009
Remember Tom Daschle was selected for two different positions in the Obama administration. The Secretary of Health and Human Services and Health Czar. These can be and are meant to be two distinct jobs (otherwise, why bother having a health czar).
At this point, if Howard Dean is not selected for at least one of these positions, it is a clear snub. But not just to Dean, but to all like-minded progressives. There's no way that Rahm Emanuel's animosity toward Dean can be explained away if they pass over him again, especially given his tremendous success at the DNC. That success is not a claim he holds over the Democratic Party, it is a testament to his ability to get things done.
We still want to get things done, right? We don't just want to bargain with the Republicans all day long and walk away without real change, do we? Are we playing a political game of who can appear to be more bi-partisan or are we really going to bring the change that was promised?
You know who promised change and then really delivered? Howard Dean. No one believed that he could change the mindset at the DNC and have the kind of success he did with the 50 state strategy. But he got it done. It would be unconscionable to ignore that. If they don't tap Dean for at least one of these positions, there is something seriously wrong with the way this administration is going about its business. This would bring things to the point where I would begin to question if they actually want to affect change or not.
By the way, why is there always room for another Republican in this team of rivals cabinet, but never room for one strong progressive voice we all trust like Howard Dean?
PPI: "US and China: Grappling Over Economic Rescue -- Part II"
US and China: Grappling Over Economic Rescue -- Part II. By Edward Gresser
The two nations must first coordinate stimulus plans, then engage in currency diplomacy
PPI Online, February 2, 2009
WASHINGTON: As the United States bails out banks and shoe-factories close their doors in China, should the two governments worry about exchange rates?
The question arose after Timothy Geithner, new US treasury secretary, suggested in a congressional hearing that China is "manipulating" the value of its currency. China then fired back, echoed by a chorus of financial-gallery alarm over potential trade conflicts. But a reading of Geithner's full comment should dispel fear of a looming trade war over exchange rates: What the US seeks is a coordinated approach to save both economies from sinking.
Geithner's argument was that Chinese currency rates are a topic that both governments need to address, but not the immediate issue. Noting
"We look forward to a productive economic dialogue with the Chinese government on a number of short- and long-tem issues. The Yuan is certainly an important piece of that discussion, but given the crisis the immediate focus needs to be on the broader issue of stabilizing domestic demand in China and the US.... Because China accounts for such a large fraction of the world economy, a further slowdown in China would lead to a substantial fall in world growth (and demand for US exports) and delay recovery from the crisis. Therefore, the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home."
This is the right context. The world needs more balanced growth in the next decade. Change in Chinese currency policy is part of this. But the immediate problem is accelerating economic collapse, which confrontation between America and China could easily worsen. Meanwhile, the immediate reason for currency diplomacy -- the imbalances that can arise from currency misalignments -- is at least for the moment fading as America's imports and deficits shrink. So, though both countries need to address the causes of their illness, they can afford to wait until both patients feel better.
Why, an observer might ask, are currency rates relevant at all?
Fundamentally, currency rates are a way to moderate swings in global growth and trade flows. A high currency value makes exports expensive, imports cheap and can slow growth when inflation threatens. A low currency value helps countries escape from economic slumps through cheaper exports. The currencies of most big economies -- the dollar, the euro, yen and pound -- swing back and forth in this way, traded at rates of $3 trillion per day. China's yuan is the exception, set in a band by government policy.
This is not inherently unworkable. But if the setting does not change with economic conditions, it can lead to big surpluses, deficits and risks. Here, we have one source of the crisis.
Leaving office, Geithner's predecessor Henry Paulson pointed to international imbalances as one of the crisis' causes. He meant that Americans were borrowing and spending too much, and Asia -- China in particular -- was saving too much and spending too little.
This is not a new phenomenon. Americans shop a lot and save little, relying on the worth of home ownership to build wealth. They save 5 or 6 percent of GDP in normal times; Asians by contrast save 20 to 40 percent of GDP, and spend less time in malls. The result is an imbalance, with Americans buying more of what everyone makes and Asians selling more than buying.
These habits have fairly deep roots: Americans have run deficits with Asia not only since the 1970s, but throughout the 19th century and the first half of the 20th century. But the imbalances of this decade grew larger and faster than those of earlier periods. US government policy, through steady tax cuts and low interest rates, drove American savings rates to just above 1 percent of GDP, the lowest figures recorded since 1934. Chinese hyper-savings and low consumption, meanwhile, helped create an anomalously high pool of capital and a steadily growing trade surplus. By 2006, America maintained a current-account deficit -- the balance between spending and receiving trade revenue, investment income, charitable donations and foreign aid -- equivalent to almost 6 percent of American GDP -- an all-time record, and double the deficit of 2001. China's surplus, meanwhile, rose from rough balance in 2003 to a 10 percent of GDP surplus in 2007, with a mirroring increase in American manufacturing-trade deficits. A fixed currency rate for the Chinese RMB, at 8.28 to the dollar from 1994 to 2005, meant currency did not respond to these changing conditions.
Geithner is therefore right to say that the yuan level is an important issue. Nor is he alone -- in the high-growth period of 2004 to 2007, economists at the International Monetary Fund and universities politely protested both Chinese currency policy and America's low savings and tax-cut mania. Nobody in a position to do something did much because solving imbalances is painful. Americans would have to save more, shop less and live modestly. Chinese would need to export less, sell more at home and shift employment from apparently reliable export factories to new sources of prosperity and create domestic demand. Chinese currency did appreciate after 2005, and America's imbalance did begin to shrink, but only by a modest amount and China's surplus continued to grow.
At some point, which nobody can quite predict, a rising imbalance becomes a risk. Both countries are seeing the consequences -- trembling banks in America, shuttering factories in coastal China, and rising unemployment in both countries.
Over time, governments need to set their recovery on a more solid foundation than the one of 2003-2006. This will require a more flexible currency in China that can moderate any returning boom, as well as better regulation and more savings in America.
But as Geithner pointed out, timing is everything. For the moment, imbalances are not the world's big problem. Markets reduce them by force, as demand collapses. With unemployment up, American families no longer go to the mall each Saturday for clothes and TVs. Imports are therefore plunging, from $229 billion in July to $183 billion by November; imports from China fell from about $33 billion to $28 billion. This is the fastest US import drop since the Second World War. As imports fall, America's trade gap shrinks, from an annualized $720 billion in early 2008 to $530 billion by the winter. Across the Pacific, Chinese migrant workers from the coastal industrial zone head home as export orders dry up. China's surplus may accordingly drop.
This collapse in demand is now the big evil governments must meet. Rising imports and imbalances may return, but are not the problem today. A confrontation over these matters would do little to solve the day's big evils, but could make them worse.
Therefore, as Geithner pointed out, currency should not be the immediate concern. Instead the US and Chinese governments need to cooperate, coordinating stimulus policies to give maximum support to demand.
As they restore growth, though, they must find ways to make it balanced growth. Yes, as ordinary people worry about jobs and growth, governments should think about the foreign-exchange markets. But they should act at the right time. Geithner's comment about currency, taken in its full context, implies that the Obama team is thinking along these lines. If so, they suggest the intention to restore health first, then place the prosperity of the 2010s on a stronger foundation than this decade's expansion -- not a bad goal at all.
Edward Gresser is director of the Trade & Global Markets Project with the Progressive Policy Institute.
The two nations must first coordinate stimulus plans, then engage in currency diplomacy
PPI Online, February 2, 2009
WASHINGTON: As the United States bails out banks and shoe-factories close their doors in China, should the two governments worry about exchange rates?
The question arose after Timothy Geithner, new US treasury secretary, suggested in a congressional hearing that China is "manipulating" the value of its currency. China then fired back, echoed by a chorus of financial-gallery alarm over potential trade conflicts. But a reading of Geithner's full comment should dispel fear of a looming trade war over exchange rates: What the US seeks is a coordinated approach to save both economies from sinking.
Geithner's argument was that Chinese currency rates are a topic that both governments need to address, but not the immediate issue. Noting
"We look forward to a productive economic dialogue with the Chinese government on a number of short- and long-tem issues. The Yuan is certainly an important piece of that discussion, but given the crisis the immediate focus needs to be on the broader issue of stabilizing domestic demand in China and the US.... Because China accounts for such a large fraction of the world economy, a further slowdown in China would lead to a substantial fall in world growth (and demand for US exports) and delay recovery from the crisis. Therefore, the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home."
This is the right context. The world needs more balanced growth in the next decade. Change in Chinese currency policy is part of this. But the immediate problem is accelerating economic collapse, which confrontation between America and China could easily worsen. Meanwhile, the immediate reason for currency diplomacy -- the imbalances that can arise from currency misalignments -- is at least for the moment fading as America's imports and deficits shrink. So, though both countries need to address the causes of their illness, they can afford to wait until both patients feel better.
Why, an observer might ask, are currency rates relevant at all?
Fundamentally, currency rates are a way to moderate swings in global growth and trade flows. A high currency value makes exports expensive, imports cheap and can slow growth when inflation threatens. A low currency value helps countries escape from economic slumps through cheaper exports. The currencies of most big economies -- the dollar, the euro, yen and pound -- swing back and forth in this way, traded at rates of $3 trillion per day. China's yuan is the exception, set in a band by government policy.
This is not inherently unworkable. But if the setting does not change with economic conditions, it can lead to big surpluses, deficits and risks. Here, we have one source of the crisis.
Leaving office, Geithner's predecessor Henry Paulson pointed to international imbalances as one of the crisis' causes. He meant that Americans were borrowing and spending too much, and Asia -- China in particular -- was saving too much and spending too little.
This is not a new phenomenon. Americans shop a lot and save little, relying on the worth of home ownership to build wealth. They save 5 or 6 percent of GDP in normal times; Asians by contrast save 20 to 40 percent of GDP, and spend less time in malls. The result is an imbalance, with Americans buying more of what everyone makes and Asians selling more than buying.
These habits have fairly deep roots: Americans have run deficits with Asia not only since the 1970s, but throughout the 19th century and the first half of the 20th century. But the imbalances of this decade grew larger and faster than those of earlier periods. US government policy, through steady tax cuts and low interest rates, drove American savings rates to just above 1 percent of GDP, the lowest figures recorded since 1934. Chinese hyper-savings and low consumption, meanwhile, helped create an anomalously high pool of capital and a steadily growing trade surplus. By 2006, America maintained a current-account deficit -- the balance between spending and receiving trade revenue, investment income, charitable donations and foreign aid -- equivalent to almost 6 percent of American GDP -- an all-time record, and double the deficit of 2001. China's surplus, meanwhile, rose from rough balance in 2003 to a 10 percent of GDP surplus in 2007, with a mirroring increase in American manufacturing-trade deficits. A fixed currency rate for the Chinese RMB, at 8.28 to the dollar from 1994 to 2005, meant currency did not respond to these changing conditions.
Geithner is therefore right to say that the yuan level is an important issue. Nor is he alone -- in the high-growth period of 2004 to 2007, economists at the International Monetary Fund and universities politely protested both Chinese currency policy and America's low savings and tax-cut mania. Nobody in a position to do something did much because solving imbalances is painful. Americans would have to save more, shop less and live modestly. Chinese would need to export less, sell more at home and shift employment from apparently reliable export factories to new sources of prosperity and create domestic demand. Chinese currency did appreciate after 2005, and America's imbalance did begin to shrink, but only by a modest amount and China's surplus continued to grow.
At some point, which nobody can quite predict, a rising imbalance becomes a risk. Both countries are seeing the consequences -- trembling banks in America, shuttering factories in coastal China, and rising unemployment in both countries.
Over time, governments need to set their recovery on a more solid foundation than the one of 2003-2006. This will require a more flexible currency in China that can moderate any returning boom, as well as better regulation and more savings in America.
But as Geithner pointed out, timing is everything. For the moment, imbalances are not the world's big problem. Markets reduce them by force, as demand collapses. With unemployment up, American families no longer go to the mall each Saturday for clothes and TVs. Imports are therefore plunging, from $229 billion in July to $183 billion by November; imports from China fell from about $33 billion to $28 billion. This is the fastest US import drop since the Second World War. As imports fall, America's trade gap shrinks, from an annualized $720 billion in early 2008 to $530 billion by the winter. Across the Pacific, Chinese migrant workers from the coastal industrial zone head home as export orders dry up. China's surplus may accordingly drop.
This collapse in demand is now the big evil governments must meet. Rising imports and imbalances may return, but are not the problem today. A confrontation over these matters would do little to solve the day's big evils, but could make them worse.
Therefore, as Geithner pointed out, currency should not be the immediate concern. Instead the US and Chinese governments need to cooperate, coordinating stimulus policies to give maximum support to demand.
As they restore growth, though, they must find ways to make it balanced growth. Yes, as ordinary people worry about jobs and growth, governments should think about the foreign-exchange markets. But they should act at the right time. Geithner's comment about currency, taken in its full context, implies that the Obama team is thinking along these lines. If so, they suggest the intention to restore health first, then place the prosperity of the 2010s on a stronger foundation than this decade's expansion -- not a bad goal at all.
Edward Gresser is director of the Trade & Global Markets Project with the Progressive Policy Institute.
Tuesday, February 3, 2009
On the CCSP revised Global Climate Change Impacts in the US report
Here We Go Again, More Cherry Picking by the CCSP. By Roger Pielke, Jr
Prometheus, February 2nd, 2009
Excerpts:
The CCSP revised and re-released Synthesis Report is out. I have not had a chance to look at thoroughly, but my first look does not leave me impressed. In fact, I am once again amazed at the brazen and willful misrepresentation of an area of climate change that I have some expertise in. The selective presentation of research on disasters and climate change by various assessment bodies leaves me convinced that such selectivity is a matter of choice and not simply incompetence. Such behavior damages the credibility of the entire climate science enterprise. Read on for the details of this latest and now common misrepresentation of the state of science on disasters and climate change.
[...]
But wait there is more. The CCSP itself reported no climatological basis for increasing economic losses in the United States in its report on extremes.
The bottom line is that the CCSP report refuses to acknowledge the range of legitimate scientific discussion on the subject of disasters and climate change. It selectively cites research that supports conclusions that it would like to reach, and dismisses and ignores that which is inconvenient. This is not how assessments should be done. How can anyone trust the climate science community as long as such shenanigans are allowed to take place?
Prometheus, February 2nd, 2009
Excerpts:
The CCSP revised and re-released Synthesis Report is out. I have not had a chance to look at thoroughly, but my first look does not leave me impressed. In fact, I am once again amazed at the brazen and willful misrepresentation of an area of climate change that I have some expertise in. The selective presentation of research on disasters and climate change by various assessment bodies leaves me convinced that such selectivity is a matter of choice and not simply incompetence. Such behavior damages the credibility of the entire climate science enterprise. Read on for the details of this latest and now common misrepresentation of the state of science on disasters and climate change.
[...]
But wait there is more. The CCSP itself reported no climatological basis for increasing economic losses in the United States in its report on extremes.
The bottom line is that the CCSP report refuses to acknowledge the range of legitimate scientific discussion on the subject of disasters and climate change. It selectively cites research that supports conclusions that it would like to reach, and dismisses and ignores that which is inconvenient. This is not how assessments should be done. How can anyone trust the climate science community as long as such shenanigans are allowed to take place?
Cuba Plans New Offshore Drilling in Search for Big Oil Finds in the Gulf of Mexico
Cuba Plans New Offshore Drilling in Search for Big Oil Finds in the Gulf of Mexico. By Thomas Omestad
US News & World Report, February 3, 2009
HAVANA—Cuban officials say that exploratory drilling to assess the potential for oil reserves in the Gulf of Mexico is likely to resume in the second quarter of this year, a sign that lower world oil prices have not derailed efforts by the Cuban government and its foreign corporate partners to keep moving toward offshore oil production.
Cuba believes it has major oil reserves in its waters. But the prospect of exploratory drilling—followed by likely future commercial drilling—in the Florida Straits has fired controversy in the United States, with the expectation that someday, foreign oil firms could be drilling as close as about 50 miles from parts of Florida.
The exploratory drilling will take place about 20 miles north of Havana and will be conducted by a consortium led by the Spanish oil firm Repsol, working with India's state-run Oil & Natural Gas Co. and Norway's StatoilHydro. Other exploratory drilling in the portion of the Gulf under Cuba's economic control is anticipated in 2010 and 2011.
"Cuba has high potential from an exploratory point of view," said Rafael Tenreyro Perez, exploration manager for Cubapetroleo (Cupet), the Cuban state oil company, in an interview. Seismic tests suggesting possible oil deposits over the past two years in Gulf waters were "very encouraging," he said.
Other firms that have, to varying degrees, partnered with the Cuban oil company in the hunt for oil either on or offshore hail from Venezuela, Malaysia, Vietnam, China, Canada, and Brazil. U.S. companies are barred from participating under regulations flowing from the 48-year-old American embargo of Cuba's economy. That widely criticized policy was intended to pressure Cuba's communist government to move toward democracy, but other countries oppose the U.S. isolation strategy toward Cuba and do business anyway.
Foreign firms have signed exploration and production agreements for 21 of the 59 blocks Cuba has created for its Gulf waters, where the biggest oil finds are believed to be located. An additional 23 blocks are said to be the subject of discussions with foreign companies.
Cupet has estimated that there are 20 billion barrels of recoverable offshore oil in Cuban waters. If that bears out, Cuba, with 11 million people, would have reserves that come into the same range as those of the United States.
The U.S. Geological Survey, though, has issued more conservative estimates: under 5 billion barrels in Cuba's offshore fields. Furthermore, most of the oil is believed to lie under deep water, where extraction is difficult and expensive.
Some see the advent of Cuban offshore oil drilling as raising the costs of maintaining the embargo policy, with other countries taking a piece of the Cuban action that might otherwise fall to some American firms. Some Capitol Hill lawmakers have urged that an exception be made in the embargo to permit energy cooperation. Overall Cuba policy is now under review by the Obama administration.
Others are worried that a future oil spill, given Gulf currents, could spoil Florida beaches and shore areas. Tenreyro says that any drilling operations will follow "the highest" international environmental standards.
Some Cuba watchers argue that environmental coordination with Cuba ought to be one of the early results of any policy changes developed by the Obama administration.
US News & World Report, February 3, 2009
HAVANA—Cuban officials say that exploratory drilling to assess the potential for oil reserves in the Gulf of Mexico is likely to resume in the second quarter of this year, a sign that lower world oil prices have not derailed efforts by the Cuban government and its foreign corporate partners to keep moving toward offshore oil production.
Cuba believes it has major oil reserves in its waters. But the prospect of exploratory drilling—followed by likely future commercial drilling—in the Florida Straits has fired controversy in the United States, with the expectation that someday, foreign oil firms could be drilling as close as about 50 miles from parts of Florida.
The exploratory drilling will take place about 20 miles north of Havana and will be conducted by a consortium led by the Spanish oil firm Repsol, working with India's state-run Oil & Natural Gas Co. and Norway's StatoilHydro. Other exploratory drilling in the portion of the Gulf under Cuba's economic control is anticipated in 2010 and 2011.
"Cuba has high potential from an exploratory point of view," said Rafael Tenreyro Perez, exploration manager for Cubapetroleo (Cupet), the Cuban state oil company, in an interview. Seismic tests suggesting possible oil deposits over the past two years in Gulf waters were "very encouraging," he said.
Other firms that have, to varying degrees, partnered with the Cuban oil company in the hunt for oil either on or offshore hail from Venezuela, Malaysia, Vietnam, China, Canada, and Brazil. U.S. companies are barred from participating under regulations flowing from the 48-year-old American embargo of Cuba's economy. That widely criticized policy was intended to pressure Cuba's communist government to move toward democracy, but other countries oppose the U.S. isolation strategy toward Cuba and do business anyway.
Foreign firms have signed exploration and production agreements for 21 of the 59 blocks Cuba has created for its Gulf waters, where the biggest oil finds are believed to be located. An additional 23 blocks are said to be the subject of discussions with foreign companies.
Cupet has estimated that there are 20 billion barrels of recoverable offshore oil in Cuban waters. If that bears out, Cuba, with 11 million people, would have reserves that come into the same range as those of the United States.
The U.S. Geological Survey, though, has issued more conservative estimates: under 5 billion barrels in Cuba's offshore fields. Furthermore, most of the oil is believed to lie under deep water, where extraction is difficult and expensive.
Some see the advent of Cuban offshore oil drilling as raising the costs of maintaining the embargo policy, with other countries taking a piece of the Cuban action that might otherwise fall to some American firms. Some Capitol Hill lawmakers have urged that an exception be made in the embargo to permit energy cooperation. Overall Cuba policy is now under review by the Obama administration.
Others are worried that a future oil spill, given Gulf currents, could spoil Florida beaches and shore areas. Tenreyro says that any drilling operations will follow "the highest" international environmental standards.
Some Cuba watchers argue that environmental coordination with Cuba ought to be one of the early results of any policy changes developed by the Obama administration.
ACSH: Counterfeit Drugs Continue to Present a Growing Threat to Global Health
Counterfeit Drugs Continue to Present a Growing Threat to Global Health, Says New Report.
"estimated to be about 10% of the global drug supply"
American Council on Science and Health, Monday, February 2, 2009
New York, NY -- Counterfeit drugs remain a real and growing threat to global health, jeopardizing the security of the American drug supply, according to an updated report by the American Council on Science and Health (ACSH).
The 2009 edition of the booklet Counterfeit Drugs: Coming to a Pharmacy Near You was released today, following peer review by a panel of top experts in the field. It documents how increasingly sophisticated counterfeiting rings, some with connections to organized crime and even terrorist groups, have improved upon their methods of evading international police and investigative forces, slipping potentially dangerous counterfeit, substandard and adulterated drugs into legitimate drug supplies, including that of the United States.
Counterfeit drugs, a term that includes fake, substandard, adulterated, and mislabeled pharmaceuticals, were estimated by the World Health Organization to be about 10% of the global drug supply, and a much higher percentage in developing countries. For years, counterfeits have wreaked havoc in developing countries and have contributed to the increasing drug-resistance of diseases such as malaria, HIV/AIDS and tuberculosis. Hundreds of thousands of these counterfeits have been shipped to pharmacies and dispensed to unwitting American consumers.
•As recently as this past year, the first episode of fatalities from tainted drugs in the United States came to light when almost 100 people died from contaminated heparin, imported from China. Of course, this number pales in comparison to the toll of counterfeit drugs in the less developed world.
•The risk of fake, adulterated medicine is even greater when drugs are purchased from unregulated online sites. Some of these, ostensibly "Canadian," have been found to actually be located in China and other poorly-regulated regions.
The FDA has no ability to control the safety of drugs purchased through these channels, and studies have found that as much as 88% of drugs being imported into the United States violate FDA safety standards and are potentially dangerous. Such importation is illegal under current law, but the FDA lacks the resources to stop the practice.
•ACSH president Dr. Elizabeth Whelan warns that the legalization of drug importation, advocated by many in Congress as an easy way to obtain cheap drugs, "represents an unjustifiable breaching of our domestic drug supply that has the potential to erase even the minimal gains we have made in the fight against counterfeit drugs."
•Efforts to address the counterfeit problem through drug pedigrees, new anti-counterfeiting technology, and increased licensing of wholesalers hold promise but must be combined with aggressive enforcement.
What can individuals do to protect themselves? According to ACSH's report, "the American consumer must be aware of the dangers posed by counterfeit drugs and be vigilant." Consumers should pay attention to the appearance and packaging of their prescription drugs for any unusual changes in shape, size or color, or sudden changes in the effectiveness of a medicine.
The ACSH report advises: "Despite certain safety issues, prescription drugs bought from state-licensed pharmacies remain by far the safest choice available to consumers. Consumers should avoid imported drugs and those purchased from unregulated online drug stores, as these have a high risk of being substandard or counterfeit and could endanger your health."
Read the updated ACSH report on Counterfeit Drugs here
"estimated to be about 10% of the global drug supply"
American Council on Science and Health, Monday, February 2, 2009
New York, NY -- Counterfeit drugs remain a real and growing threat to global health, jeopardizing the security of the American drug supply, according to an updated report by the American Council on Science and Health (ACSH).
The 2009 edition of the booklet Counterfeit Drugs: Coming to a Pharmacy Near You was released today, following peer review by a panel of top experts in the field. It documents how increasingly sophisticated counterfeiting rings, some with connections to organized crime and even terrorist groups, have improved upon their methods of evading international police and investigative forces, slipping potentially dangerous counterfeit, substandard and adulterated drugs into legitimate drug supplies, including that of the United States.
Counterfeit drugs, a term that includes fake, substandard, adulterated, and mislabeled pharmaceuticals, were estimated by the World Health Organization to be about 10% of the global drug supply, and a much higher percentage in developing countries. For years, counterfeits have wreaked havoc in developing countries and have contributed to the increasing drug-resistance of diseases such as malaria, HIV/AIDS and tuberculosis. Hundreds of thousands of these counterfeits have been shipped to pharmacies and dispensed to unwitting American consumers.
•As recently as this past year, the first episode of fatalities from tainted drugs in the United States came to light when almost 100 people died from contaminated heparin, imported from China. Of course, this number pales in comparison to the toll of counterfeit drugs in the less developed world.
•The risk of fake, adulterated medicine is even greater when drugs are purchased from unregulated online sites. Some of these, ostensibly "Canadian," have been found to actually be located in China and other poorly-regulated regions.
The FDA has no ability to control the safety of drugs purchased through these channels, and studies have found that as much as 88% of drugs being imported into the United States violate FDA safety standards and are potentially dangerous. Such importation is illegal under current law, but the FDA lacks the resources to stop the practice.
•ACSH president Dr. Elizabeth Whelan warns that the legalization of drug importation, advocated by many in Congress as an easy way to obtain cheap drugs, "represents an unjustifiable breaching of our domestic drug supply that has the potential to erase even the minimal gains we have made in the fight against counterfeit drugs."
•Efforts to address the counterfeit problem through drug pedigrees, new anti-counterfeiting technology, and increased licensing of wholesalers hold promise but must be combined with aggressive enforcement.
What can individuals do to protect themselves? According to ACSH's report, "the American consumer must be aware of the dangers posed by counterfeit drugs and be vigilant." Consumers should pay attention to the appearance and packaging of their prescription drugs for any unusual changes in shape, size or color, or sudden changes in the effectiveness of a medicine.
The ACSH report advises: "Despite certain safety issues, prescription drugs bought from state-licensed pharmacies remain by far the safest choice available to consumers. Consumers should avoid imported drugs and those purchased from unregulated online drug stores, as these have a high risk of being substandard or counterfeit and could endanger your health."
Read the updated ACSH report on Counterfeit Drugs here
State Dept: "Zimbabwe: Unity Government"
Zimbabwe: Unity Government. By Robert Wood
US State Dept, Acting Department Spokesman, Public Affairs
Washington, DC, Feb 03, 2009
The Movement for Democratic Change (MDC) has agreed to join a unity government with Robert Mugabe under the conditions called for in the Southern African Development Community (SADC) January 27 Communiqué. The success or failure of such a government will depend on credible and inclusive power sharing by Robert Mugabe and his ZANU-PF party. The international community must remain engaged and continue to scrutinize actions by Mr. Mugabe to ensure adherence to the letter and spirit of this agreement, including respect for human rights and the rule of law. We urge SADC to fulfill its obligation to guarantee that Mr. Mugabe proceeds on a new path toward reconciliation and genuine partnership with the MDC.
The U.S. will only consider new development assistance and easing of targeted sanctions when we have seen evidence of true power sharing as well as inclusive and effective governance. We will continue to provide humanitarian assistance to the Zimbabwean people in their time of suffering.
PRN: 2009/098
US State Dept, Acting Department Spokesman, Public Affairs
Washington, DC, Feb 03, 2009
The Movement for Democratic Change (MDC) has agreed to join a unity government with Robert Mugabe under the conditions called for in the Southern African Development Community (SADC) January 27 Communiqué. The success or failure of such a government will depend on credible and inclusive power sharing by Robert Mugabe and his ZANU-PF party. The international community must remain engaged and continue to scrutinize actions by Mr. Mugabe to ensure adherence to the letter and spirit of this agreement, including respect for human rights and the rule of law. We urge SADC to fulfill its obligation to guarantee that Mr. Mugabe proceeds on a new path toward reconciliation and genuine partnership with the MDC.
The U.S. will only consider new development assistance and easing of targeted sanctions when we have seen evidence of true power sharing as well as inclusive and effective governance. We will continue to provide humanitarian assistance to the Zimbabwean people in their time of suffering.
PRN: 2009/098
Today's Message to Young Entrepreneurs: Get a Nice, Safe Government Job Instead
Today's Message to Young Entrepreneurs: Get a Nice, Safe Government Job Instead. By Newt Gingrich
Feb 03, 2009
Imagine you are a young Bill Gates. You’re smart. You’re ambitious. You’re thinking about starting a business to put your talents to their best use for you and for society.
Then you turn on the television and see President Obama say that “now is not the time” for entrepreneurs to make profits and get bonuses.
You hear Vice President Joe Biden say of corporate CEOs: “I’d like to throw these guys in the brig.”
You pick up the newspaper and read about a bill sponsored by Sen. Claire McCaskill (D-Mo.) to cap the salaries of top executives (“idiots” in her words) of firms that accept government bailout money.
And you read about another bill speeding through Congress that will allow judges to alter the terms of mortgage contracts after the fact; to unilaterally reduce the amount of principal borrowers agreed to pay back when they signed their mortgage contracts.
The Vice President is Threatening to Throw Businessmen in the Brig. Why Take the Chance?
What lessons does a young entrepreneur learn from listening carefully to the voices advocating more and more government regulation and intervention in our economy?
He learns that the President has more faith in government to save the economy than free enterprise. So why not get a nice, safe government job instead?
She learns that starting a business and creating jobs may put her in the cross hairs of the Vice President. Maybe he means that part about throwing her in the brig, maybe he doesn’t. Why take the chance?
He learns that when politicians like Claire McCaskill get involved in economic enterprises, politics -- not economics -- rules. Why risk everything to have your future controlled by Washington?
And she learns that contracts aren’t worth the paper they’re written on. When judges can unilaterally re-write contracts, lenders will charge more to lend. So why even try to get that small business loan?
Biden and McCaskill Should Be Outraged With Themselves
Vice President Biden, Sen. McCaskill and others who are advocating greater and greater government intervention into private business are rightly outraged at reports of corporate CEOs receiving billions in taxpayer bailout dollars and then turning around and awarding themselves and their cronies lavish corporate bonuses.
This outrage is entirely justified. Politicians are understandably looking for someone to blame for this breach of the public’s trust.
But they should be looking at themselves. Vice President Biden and Sen. McCaskill should be outraged with themselves.
The reason is simple: If there had been no big government bailout of these companies, their CEOs would have no fiduciary duty to the taxpayers. It wouldn’t be any of Sen. McCaskill’s business how they compensate themselves.
But government offered the money, and private companies took it. So now government is in charge.
The Rules for Spending Taxpayers Money Don’t Work in the Private Market
The great management guru Peter Drucker taught us that there is a set of rules for spending the taxpayers’ money that is antithetical to the proper functioning of a private business.
For instance, when taxpayers are footing the bill, it’s perfectly legitimate for the people, through their representatives in government, to set limits on compensation.
In the free market, however, if government sets arbitrary limits on compensation, the best minds and greatest talents will go to where there are no limits. Politicians will have set these companies up to fail.
And if government decides some contracts are no longer politically tolerable, they erode the value of all contracts. And in the case of home mortgage contracts, government abrogation only makes future mortgages more expensive.
Rent Seeking Capitalism: The Growth of “Fusion Enterprise”
The danger is not simply that government will hobble private enterprise with regulation once it has become a stakeholder.
The greater danger is that the act of going into business in America will come to mean simultaneously going into the government lobbying business. Future “entrepreneurs” will compete, not just for private capital, but for government investment to give them the edge over their competitors.
Former American Enterprise Institute President Chris DeMuth calls this “fusion enterprise” and warns that it’s catching on:
“He Who Does Not Work Does Not Eat”
Since the earliest American settlers at Jamestown in 1607 adopted Captain John Smith’s rule, “He who does not work does not eat,” America has thrived in a system of private enterprise and incentives for hard work and risk-taking.
Today, we are on the verge of repudiating 400 years of free market principle.
And the irony is that the $900 billion big government, big bureaucracy, big politician stimulus package that is being passed in the name of speeding our economic recovery may make emerging from the economic downturn that much harder.
What Began as an Economic Crisis is Becoming a Cultural Crisis
This crisis, which began as an economic crisis, is becoming a cultural crisis. And the lessons being learned by young entrepreneurs are precisely the wrong ones.
We are teaching young Americans to ignore American history and look to government first.
We are teaching young Americans not to start businesses when small businesses are the engine of job creation.
We are teaching young Americans not to compete on the level playing field of the free market, but to seek to co-op government in the pursuit of profit.
In his inaugural speech, President Obama singled out the “the risk-takers, the doers, the makers of things” as the source of American greatness. Does President Obama mean what he says? Or is this one more example of his moderate rhetoric not matching his liberal deeds?
Feb 03, 2009
Imagine you are a young Bill Gates. You’re smart. You’re ambitious. You’re thinking about starting a business to put your talents to their best use for you and for society.
Then you turn on the television and see President Obama say that “now is not the time” for entrepreneurs to make profits and get bonuses.
You hear Vice President Joe Biden say of corporate CEOs: “I’d like to throw these guys in the brig.”
You pick up the newspaper and read about a bill sponsored by Sen. Claire McCaskill (D-Mo.) to cap the salaries of top executives (“idiots” in her words) of firms that accept government bailout money.
And you read about another bill speeding through Congress that will allow judges to alter the terms of mortgage contracts after the fact; to unilaterally reduce the amount of principal borrowers agreed to pay back when they signed their mortgage contracts.
The Vice President is Threatening to Throw Businessmen in the Brig. Why Take the Chance?
What lessons does a young entrepreneur learn from listening carefully to the voices advocating more and more government regulation and intervention in our economy?
He learns that the President has more faith in government to save the economy than free enterprise. So why not get a nice, safe government job instead?
She learns that starting a business and creating jobs may put her in the cross hairs of the Vice President. Maybe he means that part about throwing her in the brig, maybe he doesn’t. Why take the chance?
He learns that when politicians like Claire McCaskill get involved in economic enterprises, politics -- not economics -- rules. Why risk everything to have your future controlled by Washington?
And she learns that contracts aren’t worth the paper they’re written on. When judges can unilaterally re-write contracts, lenders will charge more to lend. So why even try to get that small business loan?
Biden and McCaskill Should Be Outraged With Themselves
Vice President Biden, Sen. McCaskill and others who are advocating greater and greater government intervention into private business are rightly outraged at reports of corporate CEOs receiving billions in taxpayer bailout dollars and then turning around and awarding themselves and their cronies lavish corporate bonuses.
This outrage is entirely justified. Politicians are understandably looking for someone to blame for this breach of the public’s trust.
But they should be looking at themselves. Vice President Biden and Sen. McCaskill should be outraged with themselves.
The reason is simple: If there had been no big government bailout of these companies, their CEOs would have no fiduciary duty to the taxpayers. It wouldn’t be any of Sen. McCaskill’s business how they compensate themselves.
But government offered the money, and private companies took it. So now government is in charge.
The Rules for Spending Taxpayers Money Don’t Work in the Private Market
The great management guru Peter Drucker taught us that there is a set of rules for spending the taxpayers’ money that is antithetical to the proper functioning of a private business.
For instance, when taxpayers are footing the bill, it’s perfectly legitimate for the people, through their representatives in government, to set limits on compensation.
In the free market, however, if government sets arbitrary limits on compensation, the best minds and greatest talents will go to where there are no limits. Politicians will have set these companies up to fail.
And if government decides some contracts are no longer politically tolerable, they erode the value of all contracts. And in the case of home mortgage contracts, government abrogation only makes future mortgages more expensive.
Rent Seeking Capitalism: The Growth of “Fusion Enterprise”
The danger is not simply that government will hobble private enterprise with regulation once it has become a stakeholder.
The greater danger is that the act of going into business in America will come to mean simultaneously going into the government lobbying business. Future “entrepreneurs” will compete, not just for private capital, but for government investment to give them the edge over their competitors.
Former American Enterprise Institute President Chris DeMuth calls this “fusion enterprise” and warns that it’s catching on:
Already, the government-appointed chief executive of AIG is boasting to his
customers and others that his firm is much better capitalized (that is, by
Washington) than the mere private firms it competes with. Several of those
rivals see the point and are lining up for their shares. We have no economic
theory, and only fragmentary casual examples, to resist this halfway house
between comprehensive socialism on the one hand and conventional regulation on
the other …
“He Who Does Not Work Does Not Eat”
Since the earliest American settlers at Jamestown in 1607 adopted Captain John Smith’s rule, “He who does not work does not eat,” America has thrived in a system of private enterprise and incentives for hard work and risk-taking.
Today, we are on the verge of repudiating 400 years of free market principle.
And the irony is that the $900 billion big government, big bureaucracy, big politician stimulus package that is being passed in the name of speeding our economic recovery may make emerging from the economic downturn that much harder.
What Began as an Economic Crisis is Becoming a Cultural Crisis
This crisis, which began as an economic crisis, is becoming a cultural crisis. And the lessons being learned by young entrepreneurs are precisely the wrong ones.
We are teaching young Americans to ignore American history and look to government first.
We are teaching young Americans not to start businesses when small businesses are the engine of job creation.
We are teaching young Americans not to compete on the level playing field of the free market, but to seek to co-op government in the pursuit of profit.
In his inaugural speech, President Obama singled out the “the risk-takers, the doers, the makers of things” as the source of American greatness. Does President Obama mean what he says? Or is this one more example of his moderate rhetoric not matching his liberal deeds?
NATO in Afghanistan: Lazy Allies
Lazy Allies, by Ted Galen Carpenter
The National Interest, February 2, 2009
Media reports indicate that President Obama may abandon his plan to ask America’s NATO partners to provide more combat troops for the mission in Afghanistan. Given how militarily useless many of the existing European deployments have been, that may not prove to be a big loss. But the feckless conduct of some of the European members of NATO in Afghanistan is indicative of a larger problem. The reality is that Washington’s much-touted alliances now involve more symbolism and tokenism than any meaningful addition to America’s military power. Immediately following the terrorist attacks on 9/11, NATO governments invoked Article V—which states that an attack on one member is an attack on all—for the first time in the alliance’s history. American leaders welcomed the European pledges of support, and the U.S.-led military campaign in Afghanistan soon had a significant NATO component.
But early on, doubts arose about how serious the European allies were about their military commitments. Indeed, most of the NATO governments seemed to view their troop deployments as personnel for humanitarian relief and nation-building tasks rather than for combat operations. The military heavy lifting was by and large left to U.S. forces and those of a few other countries, primarily Canada, Britain and the Netherlands.
Most NATO members have placed various caveats on the use of their military personnel. Some are prohibited from night operations (which are inherently more dangerous). Others are prohibited from being deployed in certain areas of the country—specifically, those areas where significant combat is occurring and additional troops might actually prove useful.
Germany is one of the worst offenders in that regard. Berlin has restricted its troops to the northern regions of Afghanistan, where virtually no fighting is taking place. Despite Washington’s repeated requests, the German government has refused to lift that restriction. That might be just as well. A December 2008 German parliamentary report concluded that the country’s troops in Afghanistan spent most of their time lounging around and drinking beer, and that many were now too fat and out of condition to be of any use in combat operations.
The desire of U.S. allies to keep their troops out of harm’s way is not confined to the Afghanistan theater—or for that matter to the NATO allies. A similar pattern emerged with the deployments of both South Korean and Japanese forces in Iraq. Seoul insisted that its troops be stationed only in Iraqi Kurdistan, by far the safest area of the country. But the South Korean government was a profile in courage compared to the Japanese government. Although Tokyo sent units of its Self-Defense Force (SDF) to Iraq, it insisted that those forces must be confined to noncombat roles. Indeed, the SDF units had to be protected by the troops of other coalition countries. Thus, from a military standpoint, the Japanese contribution was not an asset to the occupation effort—it was a liability.
Such episodes indicate that many of America’s supposed military partners are more interested in engaging in tokenism and security symbolism than they are with playing a meaningful military role. The governments of those countries want to show that they are good allies and willing participants in U.S.-led missions, while incurring few, if any, battlefield risks. That sort of conduct may salve the consciences of political leaders in allied capitals, and it may appeal to U.S. policymakers for whom symbolism is more important than substance. It may even gull an otherwise suspicious American public. But it provides little useful addition to America’s own military power.
One wonders at times if U.S. leaders believe that this country should have allies for the sake of having allies, even if those military partners bring little of value to the table. Why else would American officials tolerate the tokenism evident with the allied contributions in both Iraq and Afghanistan? And why would those same officials be so enthusiastic about the addition of tiny, militarily insignificant members to the NATO alliance?
The last round of NATO expansion brought on board such military powerhouses as Estonia, Latvia, Lithuania and Slovenia. According to the 2008 edition of the widely respected publication The Military Balance, Estonia’s annual defense budget is $386 million, and the country fields 4,100 active-duty troops. The figures for Latvia are $471 million and 5,996 troops; Lithuania, $470 million and 13,850 troops; and Slovenia, $750 million and 5,973 troops. At NATO’s summit last year in Bucharest, alliance leaders gave the green light to membership for Croatia and Albania. Croatia’s accession would add $875 million and 17,660 troops, while Albania’s would add $208 million and 11,020 military personnel.
Collectively, such members spend less on their militaries in a year than the United States spends in Iraq in two weeks. How adding such military pygmies to NATO is supposed to enhance the security of the United States is a mystery. Indeed, since several of those countries have serious tensions with their neighbors, they are not just militarily irrelevant, but are outright security liabilities that could drag the United States into needless conflicts.
U.S. policymakers ought to be far more realistic about the utility of alliances. Allies are neither good nor bad, per se. But American officials should not pretend that allies are making meaningful military contributions when the evidence indicates otherwise. Security symbolism and tokenism is of little practical use, yet that is the level of assistance that has become all too common from America’s alliance partners.
The National Interest, February 2, 2009
Media reports indicate that President Obama may abandon his plan to ask America’s NATO partners to provide more combat troops for the mission in Afghanistan. Given how militarily useless many of the existing European deployments have been, that may not prove to be a big loss. But the feckless conduct of some of the European members of NATO in Afghanistan is indicative of a larger problem. The reality is that Washington’s much-touted alliances now involve more symbolism and tokenism than any meaningful addition to America’s military power. Immediately following the terrorist attacks on 9/11, NATO governments invoked Article V—which states that an attack on one member is an attack on all—for the first time in the alliance’s history. American leaders welcomed the European pledges of support, and the U.S.-led military campaign in Afghanistan soon had a significant NATO component.
But early on, doubts arose about how serious the European allies were about their military commitments. Indeed, most of the NATO governments seemed to view their troop deployments as personnel for humanitarian relief and nation-building tasks rather than for combat operations. The military heavy lifting was by and large left to U.S. forces and those of a few other countries, primarily Canada, Britain and the Netherlands.
Most NATO members have placed various caveats on the use of their military personnel. Some are prohibited from night operations (which are inherently more dangerous). Others are prohibited from being deployed in certain areas of the country—specifically, those areas where significant combat is occurring and additional troops might actually prove useful.
Germany is one of the worst offenders in that regard. Berlin has restricted its troops to the northern regions of Afghanistan, where virtually no fighting is taking place. Despite Washington’s repeated requests, the German government has refused to lift that restriction. That might be just as well. A December 2008 German parliamentary report concluded that the country’s troops in Afghanistan spent most of their time lounging around and drinking beer, and that many were now too fat and out of condition to be of any use in combat operations.
The desire of U.S. allies to keep their troops out of harm’s way is not confined to the Afghanistan theater—or for that matter to the NATO allies. A similar pattern emerged with the deployments of both South Korean and Japanese forces in Iraq. Seoul insisted that its troops be stationed only in Iraqi Kurdistan, by far the safest area of the country. But the South Korean government was a profile in courage compared to the Japanese government. Although Tokyo sent units of its Self-Defense Force (SDF) to Iraq, it insisted that those forces must be confined to noncombat roles. Indeed, the SDF units had to be protected by the troops of other coalition countries. Thus, from a military standpoint, the Japanese contribution was not an asset to the occupation effort—it was a liability.
Such episodes indicate that many of America’s supposed military partners are more interested in engaging in tokenism and security symbolism than they are with playing a meaningful military role. The governments of those countries want to show that they are good allies and willing participants in U.S.-led missions, while incurring few, if any, battlefield risks. That sort of conduct may salve the consciences of political leaders in allied capitals, and it may appeal to U.S. policymakers for whom symbolism is more important than substance. It may even gull an otherwise suspicious American public. But it provides little useful addition to America’s own military power.
One wonders at times if U.S. leaders believe that this country should have allies for the sake of having allies, even if those military partners bring little of value to the table. Why else would American officials tolerate the tokenism evident with the allied contributions in both Iraq and Afghanistan? And why would those same officials be so enthusiastic about the addition of tiny, militarily insignificant members to the NATO alliance?
The last round of NATO expansion brought on board such military powerhouses as Estonia, Latvia, Lithuania and Slovenia. According to the 2008 edition of the widely respected publication The Military Balance, Estonia’s annual defense budget is $386 million, and the country fields 4,100 active-duty troops. The figures for Latvia are $471 million and 5,996 troops; Lithuania, $470 million and 13,850 troops; and Slovenia, $750 million and 5,973 troops. At NATO’s summit last year in Bucharest, alliance leaders gave the green light to membership for Croatia and Albania. Croatia’s accession would add $875 million and 17,660 troops, while Albania’s would add $208 million and 11,020 military personnel.
Collectively, such members spend less on their militaries in a year than the United States spends in Iraq in two weeks. How adding such military pygmies to NATO is supposed to enhance the security of the United States is a mystery. Indeed, since several of those countries have serious tensions with their neighbors, they are not just militarily irrelevant, but are outright security liabilities that could drag the United States into needless conflicts.
U.S. policymakers ought to be far more realistic about the utility of alliances. Allies are neither good nor bad, per se. But American officials should not pretend that allies are making meaningful military contributions when the evidence indicates otherwise. Security symbolism and tokenism is of little practical use, yet that is the level of assistance that has become all too common from America’s alliance partners.
Brookings' Rivlin on Budget Policy Challenges
Budget Policy Challenges, by Alice M. Rivlin, Senior Fellow, Metropolitan Policy Program, Economic Studies, Brookings Institution
House Committee on the Budget, Jan 27, 2009
Mr. Chairman and members of the Committee: It is a pleasure for me to be back at the House Budget Committee. I am especially gratified to follow my former colleague, Douglas Elmendorf, as he makes the first of many appearances before this Committee as Director of the Congressional Budget Office.
I will say a few words about the uncertainties of the economic outlook and then turn to the question of how to deal with the immediate and longer-run challenges of fiscal policy. The challenge of budget-making has never been greater. Indeed, I believe that the future viability of the United States economy depends very heavily on budget policy-makers’ ability to focus on two seemingly contradictory imperatives at the same time:
The immediate need to take actions which will mitigate the impact of the recession and help the economy recover—actions that necessarily require big increases in the budget deficit The equally urgent need to take actions that will restore fiscal responsibility and reassure our creditors that we are getting our fiscal house in order—actions to bring future deficits down.I stress two sets of actions because I do not believe it will be sufficient to pay lip service to the long run challenge, while acting only on deficit-increasing responses to the current financial and economic crisis. Congress and the Administration must work together on actual solutions to both problems at the same time.
The Economic Outlook
We meet at a time of extraordinary uncertainty about how deep the recession will be and how long it will last. Forecasters all admit that they have little confidence in their ability to predict how consumers, producers, and investors at home and abroad will react to the cataclysmic economic events that have occurred. But people in the forecasting business still have to produce forecasts, so they do the best they can. The Congressional Budget Office (CBO) forecasts that the recession will “last well into 2009” and that the economy will begin to recover, albeit slowly, in 2010. CBO expects unemployment to peak at about 9 percent. The CBO is a bit more pessimistic than the Blue Chip average of commercial forecasters, because the rules of CBO forecasting do not allow them to take account of likely congressional actions to stimulate the economy and enhance recovery.
Right now I think we should be skeptical of all forecasts and especially conscious of the risk that things may continue to go worse than expected. The current CBO forecast is much more pessimistic than the one released just last September, and the Blue Chip consensus has been going steadily south for many months. Additional revelations of weakness in the financial services sector could further impede credit flows and produce a continued slide in all forecasters’ expectations.
Indeed, uncertainty about the health of the financial sector compromises all current forecasting efforts. The economic models used by forecasters are based on the experience of the post World War II period, especially the last several decades. Not since the 1930’s, however, have we experienced a downturn caused by crisis in the financial sector. Despite aggressive efforts of the Treasury and the Federal Reserve to stabilize the financial sector, credit is not flowing normally, even to credit- worthy borrowers. Continued instability in the financial sector and credit tightness could deepen the recession and delay recovery.
Also adding to the uncertainty and increasing the chance that recovery will be unusually slow is the fact that is that returning to the pre-crisis economy is not desirable. Before the current crisis Americans were consuming and borrowing too much, while saving too little. We had become an over-mortgaged, over-leveraged society dependent on the inflow of foreign credit. If recovery from this recession is to be solid and sustainable, we must stop living beyond our means. We must transform ourselves into a society that consumes less, saves more and finances a larger fraction of its investment with domestic saving, rather than foreign borrowing. This transformation is necessary, but it will put recovery on a slower track.
Indeed, not since we were a developing country have we been so dependent on foreign creditors. We are lucky that, even though this world-wide financial crisis started in the United States, the response of world investors has been to flock to the safety of U.S. Treasuries, which makes it possible for our government to borrow short-term at astonishingly low rates. But we cannot count on these favorable borrowing conditions continuing forever. Especially if we fail to take serious steps to bring down future budget deficits, the United States Government could lose the confidence of its foreign creditors and be forced to pay much higher interest rates on to finance both public debt and private debt. Rapid increases in interest rates and a plummeting dollar could deepen the recession and slow recovery.
An “Anti-Recession Package” and Investment in Future Growth
Despite the uncertainty of forecasts it is already clear that this recession is bad and that worse is yet to come. Recessions always increase budget deficits as revenues drop and recession-related spending increases. These automatic deficits help stabilize the economy. In addition, since an unusually severe downturn in the economy is threatening, the government should act quickly to mitigate the downslide with spending increases and revenue cuts that will stimulate consumer and investor spending, create jobs and protect the most vulnerable from the ravages of recession.
What we used to call “stimulus” (temporary spending or tax relief designed to jump-start the economy) has been merged into a broader concept of “recovery” and investment in future growth. However, I believe an important distinction should be made between a short-term “anti-recession package” (aka “stimulus”) and a more permanent shift of resources into public investment in future growth. We need both. The first priority is an “anti-recession package” that can be both enacted and spent quickly, will create and preserve jobs in the near-term, and not add significantly to long run deficits. It should include temporary aid to states in the form of an increased Medicaid match and block grants for education and other purposes. Aiding states will prevent them from taking actions to balance their budgets--cutting spending and raising taxes--that will make the recession worse. The package should also include temporary funding for state and local governments to enable them to move ahead quickly with genuinely “shovel ready” infrastructure projects (including repairs) that will employ workers soon and improve public facilities. Another important element of the anti-recession package should be substantial transfers to lower and middle income people, because they need the money and will spend it quickly. This objective would be served by increasing the Supplemental Nutrition Assistance Program (SNAP), unemployment compensation, and the Earned Income Tax Credit. Helping people who lose their jobs to keep their health insurance and aiding distressed homeowners also belong in this “anti-recession” package. On the tax side, my favorite vehicle would be a payroll tax holiday, because payroll tax is paid by all workers and is far more significant than the income tax for people in the lower half of the income distribution. Moreover, a payroll tax holiday would be relatively easy to reverse when tax relief was no longer appropriate. This anti-recession package should move forward quickly. Because its components would be temporary, there would be little reason for concern about its impact on the deficit three or four years down the road.
The anti recession package should be distinguished from longer-run investments needed to enhance the future growth and productivity of the economy. The distinction is not that these longer-run investments are less needed or less urgent. We have neglected our public infrastructure for far too long and invested too little in the skills of the future workforce. If our economy is to grow sustainably in the future we need to modernize our transportation system to make it more efficient and less reliant on fossil fuels. We need to assure access to modern communications across the country and invest in the information technology and data analysis needed to make medical care delivery more efficient and effective. We need a well thought-out program of investment in workforce skills, early childhood education, post-secondary education, science and technology. Such a long-term investment program should not be put together hastily and lumped in with the anti-recession package. The elements of the investment program must be carefully planned and will not create many jobs right away.
Since a sustained program of public investment in productivity-enhancing skills and infrastructure will add to federal spending for many years, it must be paid for and not simply added to already huge projected long-term deficits. That means either shifting spending from less productive uses or finding more revenue. Overtime, Congress could reduce commitments to defense programs and weapons systems that reflect outmoded thinking about threats to U.S. security, reduce agricultural subsidies, and eliminate many small programs that have outlived their original priorities. Reform of the tax system--including making the income tax simpler and fairer or increasing reliance on consumer taxation—could produce more revenue with less drag on economic growth. None of these policies would be easy, but the resources to pay for large permanent increases in federal spending must be shifted from somewhere else as the economy returns to full employment. Congress will only be able to accomplish this reallocation of resources if it reinstates some form of long run (say, ten year) PAYGO and caps on discretionary spending.
I understand the reasons for lumping together the anti-recession and investment packages into one big bill that can pass quickly in this emergency. A large combined package will get attention and help restore confidence that the federal government is taking action—even if part the money spends out slowly. But there are two kinds of risks in combining the two objectives. One is that money will be wasted because the investment elements were not carefully crafted. The other is that it will be harder to return to fiscal discipline as the economy recovers if the longer run spending is not offset by reductions or new revenues.
Immediate Action to Bring Down Future Deficits
As this Committee knows well, projections of the federal budget show rapidly rising spending over the next several decades attributable to three major entitlement programs; namely, Medicare, Medicaid and Social Security. Under current rules, Social Security spending will rise rapidly over the next two decades, but level off after the Baby Boom generation passes through the system. The health care entitlements are expected to rise even faster. Moreover, they are expected to keep on rising because they are dominated by continued increases in the spending for health care in both the public and private sectors. If policies are not changed Medicare and Medicaid—and to a lesser extent Social Security—will drive federal spending up considerably faster than the rate at which the economy is likely to grow. Unless Americans consent to tax burdens that rise as fast as spending, a widening gap will open up. We will not be able to finance these continuously growing deficits.
Because rapidly rising debt threaten our credibility as sound fiscal managers, we do not have the luxury of waiting until the economy recovers before taking actions to bring down projected future deficits. Congress and the Administration should take actual steps this year to reduce those deficits in order to demonstrate clearly that we are capable of putting our fiscal house in order. This can be done without endangering economic recovery.
The crisis may have made Social Security less of a political “third rail” and provided an opportunity to put the system on a sound fiscal basis for the foreseeable future. Fixing Social Security is a relatively easy technical problem. It will take some combination of several much-discussed marginal changes: raising the retirement age gradually in the future (and then indexing it to longevity), raising the cap on the payroll tax, fixing the COLA, and modifying the indexing of initial benefits so they grow more slowly for more affluent people. In view of the collapse of market values, no one is likely to argue seriously for diverting existing revenues to private accounts, so the opportunity to craft a compromise is much greater than it was a few years ago. Fixing Social Security would be a confidence building achievement for bi-partisan cooperation and would enhance our reputation for fiscal prudence.
Vigorous action should also be taken to make Medicare more cost effective and slow the rate of growth of Medicare spending, which contributes so much to projected deficits. While restraining health spending growth should be a major feature of comprehensive health reform, Medicare is an ideal place to start the effort. Medicare is the largest payer for health services and should play a leadership role in collecting information on the cost and effectiveness of alternative treatments and ways of delivering services, and designing reimbursement incentives to reward effectiveness and discourage waste. Congress has a history of allowing pressure from providers and suppliers (for example, suppliers of durable medical equipment or pharmaceutical companies) to thwart efforts to contain Medicare costs. The government has also not been adequately attentive to punishing and preventing Medicare fraud. The United States will not stand a chance of restoring fiscal responsibility at the federal level unless Congress develops the political will to hold health providers accountable—whether in the context of existing federal programs or comprehensive health reform--for delivering more cost effective care. A good place to start is Medicare.
Process Reform
This Committee does not need to be convinced that deficits matter and that the deficits looming in the federal budget--exacerbated by the rapid increases in debt associated with recession and financial bailout—must be dealt with sooner rather than later. You know that procrastination will make the hard choices harder and make us increasingly dependent on our foreign creditors and exposed to their policy priorities. The question is: should you take actual steps now to reduce future deficits or design process reforms that will force you to confront viable options and make choices in the future? My answer is: do both.
Fixing Social Security and taking aggressive steps to control the growth of Medicare costs would be visible evidence that Congress and the new Administration have the courage to rein in future deficits. But the Congress also needs to restore discipline to the budget process—not use recession or the financial meltdown as excuses for throwing fiscal responsibility to the winds just when we are going to need it more than ever. A large temporary anti-recession package is the right fiscal policy in the face of severe recession and should not be subject to offsets—that would defeat the purpose. But more permanent investments in future growth—also good policy—should be paid for and not allowed to add to future deficits. Caps on discretionary spending and PAYGO for revenues and mandatory spending should be reinstated and seriously enforced.
Moreover, PAYGO is not enough, because it only guarantees that congressional actions with respect to entitlements and revenues will not make projected deficits worse than they would be under current policies. But, we all know that deficits projected under current policy will rise at unsustainable rates. Spending required by Medicare, Medicaid and Social Security will rise substantially faster than revenues at any feasible set of tax rates. We will not be able to borrow that much money—even if we thought it desirable to do so.
The current budget process subjects a declining—discretionary spending—to annual scrutiny by leaves entitlement programs and revenues on automatic pilot outside the budget process. Fiscal responsibility requires that all long-term spending commitments be subject to periodic review along with taxes and tax expenditures. There is no compelling logic for applying caps and intense annual scrutiny to discretionary spending, while leaving huge spending commitments, such as Medicare or the home mortgage deduction entirely outside the budget process and not subject to review on a regular basis. I am a member of a bipartisan group called the Fiscal Seminar (sponsored by The Brookings Institution and the Heritage Foundation) that addressed this problem in a paper entitled, Taking back our Fiscal Future, in 2008. We may not have come up with the right solution, but we certainly identified a serious problem that stands in the way of getting the federal budget on a sustainable long run track.
Not a Partisan Matter
The challenges that face this Committee—mitigating the recession, enhancing future growth, restoring sustainable fiscal responsibility—cannot be solved by one political party, but require non partisan analysis and bipartisan cooperation. Many budget analysts with quite disparate views on particular policies share the conviction that Congress and the Administration must meet the double challenge of reviving the economy and restoring fiscal responsibility at the same time. I attach a memo to President Obama signed by twelve experienced budget analysts (including myself) that emphasizes these points.
Thank you, Mr. Chairman and members of the Committee.
House Committee on the Budget, Jan 27, 2009
Mr. Chairman and members of the Committee: It is a pleasure for me to be back at the House Budget Committee. I am especially gratified to follow my former colleague, Douglas Elmendorf, as he makes the first of many appearances before this Committee as Director of the Congressional Budget Office.
I will say a few words about the uncertainties of the economic outlook and then turn to the question of how to deal with the immediate and longer-run challenges of fiscal policy. The challenge of budget-making has never been greater. Indeed, I believe that the future viability of the United States economy depends very heavily on budget policy-makers’ ability to focus on two seemingly contradictory imperatives at the same time:
The immediate need to take actions which will mitigate the impact of the recession and help the economy recover—actions that necessarily require big increases in the budget deficit The equally urgent need to take actions that will restore fiscal responsibility and reassure our creditors that we are getting our fiscal house in order—actions to bring future deficits down.I stress two sets of actions because I do not believe it will be sufficient to pay lip service to the long run challenge, while acting only on deficit-increasing responses to the current financial and economic crisis. Congress and the Administration must work together on actual solutions to both problems at the same time.
The Economic Outlook
We meet at a time of extraordinary uncertainty about how deep the recession will be and how long it will last. Forecasters all admit that they have little confidence in their ability to predict how consumers, producers, and investors at home and abroad will react to the cataclysmic economic events that have occurred. But people in the forecasting business still have to produce forecasts, so they do the best they can. The Congressional Budget Office (CBO) forecasts that the recession will “last well into 2009” and that the economy will begin to recover, albeit slowly, in 2010. CBO expects unemployment to peak at about 9 percent. The CBO is a bit more pessimistic than the Blue Chip average of commercial forecasters, because the rules of CBO forecasting do not allow them to take account of likely congressional actions to stimulate the economy and enhance recovery.
Right now I think we should be skeptical of all forecasts and especially conscious of the risk that things may continue to go worse than expected. The current CBO forecast is much more pessimistic than the one released just last September, and the Blue Chip consensus has been going steadily south for many months. Additional revelations of weakness in the financial services sector could further impede credit flows and produce a continued slide in all forecasters’ expectations.
Indeed, uncertainty about the health of the financial sector compromises all current forecasting efforts. The economic models used by forecasters are based on the experience of the post World War II period, especially the last several decades. Not since the 1930’s, however, have we experienced a downturn caused by crisis in the financial sector. Despite aggressive efforts of the Treasury and the Federal Reserve to stabilize the financial sector, credit is not flowing normally, even to credit- worthy borrowers. Continued instability in the financial sector and credit tightness could deepen the recession and delay recovery.
Also adding to the uncertainty and increasing the chance that recovery will be unusually slow is the fact that is that returning to the pre-crisis economy is not desirable. Before the current crisis Americans were consuming and borrowing too much, while saving too little. We had become an over-mortgaged, over-leveraged society dependent on the inflow of foreign credit. If recovery from this recession is to be solid and sustainable, we must stop living beyond our means. We must transform ourselves into a society that consumes less, saves more and finances a larger fraction of its investment with domestic saving, rather than foreign borrowing. This transformation is necessary, but it will put recovery on a slower track.
Indeed, not since we were a developing country have we been so dependent on foreign creditors. We are lucky that, even though this world-wide financial crisis started in the United States, the response of world investors has been to flock to the safety of U.S. Treasuries, which makes it possible for our government to borrow short-term at astonishingly low rates. But we cannot count on these favorable borrowing conditions continuing forever. Especially if we fail to take serious steps to bring down future budget deficits, the United States Government could lose the confidence of its foreign creditors and be forced to pay much higher interest rates on to finance both public debt and private debt. Rapid increases in interest rates and a plummeting dollar could deepen the recession and slow recovery.
An “Anti-Recession Package” and Investment in Future Growth
Despite the uncertainty of forecasts it is already clear that this recession is bad and that worse is yet to come. Recessions always increase budget deficits as revenues drop and recession-related spending increases. These automatic deficits help stabilize the economy. In addition, since an unusually severe downturn in the economy is threatening, the government should act quickly to mitigate the downslide with spending increases and revenue cuts that will stimulate consumer and investor spending, create jobs and protect the most vulnerable from the ravages of recession.
What we used to call “stimulus” (temporary spending or tax relief designed to jump-start the economy) has been merged into a broader concept of “recovery” and investment in future growth. However, I believe an important distinction should be made between a short-term “anti-recession package” (aka “stimulus”) and a more permanent shift of resources into public investment in future growth. We need both. The first priority is an “anti-recession package” that can be both enacted and spent quickly, will create and preserve jobs in the near-term, and not add significantly to long run deficits. It should include temporary aid to states in the form of an increased Medicaid match and block grants for education and other purposes. Aiding states will prevent them from taking actions to balance their budgets--cutting spending and raising taxes--that will make the recession worse. The package should also include temporary funding for state and local governments to enable them to move ahead quickly with genuinely “shovel ready” infrastructure projects (including repairs) that will employ workers soon and improve public facilities. Another important element of the anti-recession package should be substantial transfers to lower and middle income people, because they need the money and will spend it quickly. This objective would be served by increasing the Supplemental Nutrition Assistance Program (SNAP), unemployment compensation, and the Earned Income Tax Credit. Helping people who lose their jobs to keep their health insurance and aiding distressed homeowners also belong in this “anti-recession” package. On the tax side, my favorite vehicle would be a payroll tax holiday, because payroll tax is paid by all workers and is far more significant than the income tax for people in the lower half of the income distribution. Moreover, a payroll tax holiday would be relatively easy to reverse when tax relief was no longer appropriate. This anti-recession package should move forward quickly. Because its components would be temporary, there would be little reason for concern about its impact on the deficit three or four years down the road.
The anti recession package should be distinguished from longer-run investments needed to enhance the future growth and productivity of the economy. The distinction is not that these longer-run investments are less needed or less urgent. We have neglected our public infrastructure for far too long and invested too little in the skills of the future workforce. If our economy is to grow sustainably in the future we need to modernize our transportation system to make it more efficient and less reliant on fossil fuels. We need to assure access to modern communications across the country and invest in the information technology and data analysis needed to make medical care delivery more efficient and effective. We need a well thought-out program of investment in workforce skills, early childhood education, post-secondary education, science and technology. Such a long-term investment program should not be put together hastily and lumped in with the anti-recession package. The elements of the investment program must be carefully planned and will not create many jobs right away.
Since a sustained program of public investment in productivity-enhancing skills and infrastructure will add to federal spending for many years, it must be paid for and not simply added to already huge projected long-term deficits. That means either shifting spending from less productive uses or finding more revenue. Overtime, Congress could reduce commitments to defense programs and weapons systems that reflect outmoded thinking about threats to U.S. security, reduce agricultural subsidies, and eliminate many small programs that have outlived their original priorities. Reform of the tax system--including making the income tax simpler and fairer or increasing reliance on consumer taxation—could produce more revenue with less drag on economic growth. None of these policies would be easy, but the resources to pay for large permanent increases in federal spending must be shifted from somewhere else as the economy returns to full employment. Congress will only be able to accomplish this reallocation of resources if it reinstates some form of long run (say, ten year) PAYGO and caps on discretionary spending.
I understand the reasons for lumping together the anti-recession and investment packages into one big bill that can pass quickly in this emergency. A large combined package will get attention and help restore confidence that the federal government is taking action—even if part the money spends out slowly. But there are two kinds of risks in combining the two objectives. One is that money will be wasted because the investment elements were not carefully crafted. The other is that it will be harder to return to fiscal discipline as the economy recovers if the longer run spending is not offset by reductions or new revenues.
Immediate Action to Bring Down Future Deficits
As this Committee knows well, projections of the federal budget show rapidly rising spending over the next several decades attributable to three major entitlement programs; namely, Medicare, Medicaid and Social Security. Under current rules, Social Security spending will rise rapidly over the next two decades, but level off after the Baby Boom generation passes through the system. The health care entitlements are expected to rise even faster. Moreover, they are expected to keep on rising because they are dominated by continued increases in the spending for health care in both the public and private sectors. If policies are not changed Medicare and Medicaid—and to a lesser extent Social Security—will drive federal spending up considerably faster than the rate at which the economy is likely to grow. Unless Americans consent to tax burdens that rise as fast as spending, a widening gap will open up. We will not be able to finance these continuously growing deficits.
Because rapidly rising debt threaten our credibility as sound fiscal managers, we do not have the luxury of waiting until the economy recovers before taking actions to bring down projected future deficits. Congress and the Administration should take actual steps this year to reduce those deficits in order to demonstrate clearly that we are capable of putting our fiscal house in order. This can be done without endangering economic recovery.
The crisis may have made Social Security less of a political “third rail” and provided an opportunity to put the system on a sound fiscal basis for the foreseeable future. Fixing Social Security is a relatively easy technical problem. It will take some combination of several much-discussed marginal changes: raising the retirement age gradually in the future (and then indexing it to longevity), raising the cap on the payroll tax, fixing the COLA, and modifying the indexing of initial benefits so they grow more slowly for more affluent people. In view of the collapse of market values, no one is likely to argue seriously for diverting existing revenues to private accounts, so the opportunity to craft a compromise is much greater than it was a few years ago. Fixing Social Security would be a confidence building achievement for bi-partisan cooperation and would enhance our reputation for fiscal prudence.
Vigorous action should also be taken to make Medicare more cost effective and slow the rate of growth of Medicare spending, which contributes so much to projected deficits. While restraining health spending growth should be a major feature of comprehensive health reform, Medicare is an ideal place to start the effort. Medicare is the largest payer for health services and should play a leadership role in collecting information on the cost and effectiveness of alternative treatments and ways of delivering services, and designing reimbursement incentives to reward effectiveness and discourage waste. Congress has a history of allowing pressure from providers and suppliers (for example, suppliers of durable medical equipment or pharmaceutical companies) to thwart efforts to contain Medicare costs. The government has also not been adequately attentive to punishing and preventing Medicare fraud. The United States will not stand a chance of restoring fiscal responsibility at the federal level unless Congress develops the political will to hold health providers accountable—whether in the context of existing federal programs or comprehensive health reform--for delivering more cost effective care. A good place to start is Medicare.
Process Reform
This Committee does not need to be convinced that deficits matter and that the deficits looming in the federal budget--exacerbated by the rapid increases in debt associated with recession and financial bailout—must be dealt with sooner rather than later. You know that procrastination will make the hard choices harder and make us increasingly dependent on our foreign creditors and exposed to their policy priorities. The question is: should you take actual steps now to reduce future deficits or design process reforms that will force you to confront viable options and make choices in the future? My answer is: do both.
Fixing Social Security and taking aggressive steps to control the growth of Medicare costs would be visible evidence that Congress and the new Administration have the courage to rein in future deficits. But the Congress also needs to restore discipline to the budget process—not use recession or the financial meltdown as excuses for throwing fiscal responsibility to the winds just when we are going to need it more than ever. A large temporary anti-recession package is the right fiscal policy in the face of severe recession and should not be subject to offsets—that would defeat the purpose. But more permanent investments in future growth—also good policy—should be paid for and not allowed to add to future deficits. Caps on discretionary spending and PAYGO for revenues and mandatory spending should be reinstated and seriously enforced.
Moreover, PAYGO is not enough, because it only guarantees that congressional actions with respect to entitlements and revenues will not make projected deficits worse than they would be under current policies. But, we all know that deficits projected under current policy will rise at unsustainable rates. Spending required by Medicare, Medicaid and Social Security will rise substantially faster than revenues at any feasible set of tax rates. We will not be able to borrow that much money—even if we thought it desirable to do so.
The current budget process subjects a declining—discretionary spending—to annual scrutiny by leaves entitlement programs and revenues on automatic pilot outside the budget process. Fiscal responsibility requires that all long-term spending commitments be subject to periodic review along with taxes and tax expenditures. There is no compelling logic for applying caps and intense annual scrutiny to discretionary spending, while leaving huge spending commitments, such as Medicare or the home mortgage deduction entirely outside the budget process and not subject to review on a regular basis. I am a member of a bipartisan group called the Fiscal Seminar (sponsored by The Brookings Institution and the Heritage Foundation) that addressed this problem in a paper entitled, Taking back our Fiscal Future, in 2008. We may not have come up with the right solution, but we certainly identified a serious problem that stands in the way of getting the federal budget on a sustainable long run track.
Not a Partisan Matter
The challenges that face this Committee—mitigating the recession, enhancing future growth, restoring sustainable fiscal responsibility—cannot be solved by one political party, but require non partisan analysis and bipartisan cooperation. Many budget analysts with quite disparate views on particular policies share the conviction that Congress and the Administration must meet the double challenge of reviving the economy and restoring fiscal responsibility at the same time. I attach a memo to President Obama signed by twelve experienced budget analysts (including myself) that emphasizes these points.
Thank you, Mr. Chairman and members of the Committee.
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